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Entrepreneurship Essentials
Assignment - Week 11
TYPE OF QUESTION: MCQ/MSQ
Number of questions: 15 Total mark: 15 X 1 = 15
Instruction: If all the options are correct, choose “All the options are correct” and not any
one individual option
_____________________________________________________________________________
QUESTION 1:
Read the following statements regarding estimating discounted net present value and
answer the question following them.
A. It is assumed that all cash flows other than the initial investment occur at the end of
respective periods.
B. All cash flows generated by an investment project are immediately reinvested at a rate of
return equal to the IRR of the project.
C. All cash flows generated by an investment project are immediately reinvested at a rate of
return equal to the discount rate.
D. All cash flows other than the initial investment occur at the beginning of respective
periods.
Which of the above are the two correct major assumptions of discounted net present value
estimation?
Options
a. A & C
b. A & D
c. B & D
d. C & D
Correct answer: a

Detailed solution
The major two assumptions are i. All cash flows other than the initial investment occur at the end
of respective periods; ii. All cash flows generated by an investment project are immediately
reinvested at a rate of return equal to the discount rate.
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QUESTION 2:
Which of the following statements is incorrect?
Options
a. A project may look attractive based on the discounted net present value method but may
not be so based on break-even analysis.
b. The hurdle rate is the minimum rate of return below which a company will not accept a
project.
c. The break-even point estimation takes into account the time value of money.
d. The payback period method does not take into account the time value of money.
Correct Answer: c
Detailed solution
The payback period method of estimation does not take into account the time value of
money. It uses the future projected financial data at present value.

QUESTION 3:
An article appeared in the Vogue journal with the title “Netflix of Eye Wear” and that led to a
huge number of customer registration for purchasing the product. The article itself was
influenced by a word of mouth by one of the faculty members of the university where the
founders were studying. Which marketing method did Warby Parker use?
Options
a. Public relations.
b. Content marketing.
c. Social media.
d. Advertisement.
e. Influencer marketing
Correct answer: a
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Detailed solution
Warby Parker used Public Relation marketing. They engineered to publish an article in the
magazine Vogue to create awareness about their product and value proposition.

QUESTION 4:
Which of the following is not part of a great launch?
Options
a. Empathizing to define the pain-point.
b. Timing and cross-functional readiness
c. Influencers/Customers.
d. Pre-brief.
e. Messaging.
Correct answer: a
Detailed solution
Empathizing to define the pain point is much before the launch of a product and is not part of the
elements of a great launch.

QUESTION 5:
Which of the following is not part of the go-to-market strategies?
Options
a. Market segmentation and strategic product roadmap, marketing strategies.
b. Product-market-fit, competitive landscape, and pricing model.
c. Distribution/ Channel/ Partner model.
d. Engagement with the early majority of customers for achieving growth.
Correct Answer: d
Detailed solution
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The early majority of customers are acquired much later than the launch of a product. While a
long-term view must be at the back of the mind while launching a product, it is seldom a part of
go-to-market strategy.

QUESTION 6:
Which of the following is not true?
Options
a. Customer acquisition cost must be less than the lifetime value.
b. If our business does not offer the choice for a customer to come back repeatedly, we
should not spend as much money to acquire customers as we earn from that customer in
the first transaction.
c. The number of registered users is definitely regarded as an important metric that can be
highlighted during a presentation before investors since investors would view that as a
guaranteed success factor.
d. Network-based companies such as Amazon & Flipkart can afford to spend a lot of money
to acquire customers at a high burn rate since they offer many choices to customers to
come back repeatedly.
Correct answer: c
Detailed solution
The number of customers is a vanity metric and one should not chase it blindly. On the flip side,
the number of customers who have already purchased your product or service is a better metric.
The number of return / repeat customers is one of the best metrics and an indicators of success.

QUESTION 7:
Which of the following is not part of the capital budgeting decision process

a) Comparing two or more business models

b) Estimating the acceptability of a project based on the expected return
c) Selection between multiple machines based on the cash flow attributed to the respective
machines.
d) Estimating the break-even point
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Correct Answer: d

Detailed Solution:

Break‐even point analysis is not part of the capital budgeting decision process.

QUESTION 8:
Which of the following statements is NOT correct about capital budgeting?

a) It helps us to assess the performance of managers in the efficient deployment of capital.

b) It helps entrepreneurs to understand the comparative merits of business opportunities.
c) Though information for applying capital budgeting techniques is futuristic, it provides
useful information for decision-making.
d) Helps in selection between multiple machines and ‘buy or lease’ decisions.

Correct Answer: a

Detailed Solution:

Capital budgeting does not help to make any comparative analysis of the performance of
managers.

QUESTION 9:
A business contract requires ₹700 initial investment (year zero). It is likely to generate an annual
net cash flow of ₹200 for five years beginning from year one and return no salvage value at the
end of the business horizon. If required, use the rate of return @ 10%. Estimate the net present
value in rounded full Rupee (rounded off to Rupee)? The present value multiplication factor for
10% discount rate for 5 years is 3.79.

a) ₹ 58
b) ₹ 258
c) ₹ 358
d) ₹ 158

Correct Answer: d

Detailed Solution:
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NPV = 200X3.79 (discounted present value) – 600 (initial investment) = 758.15 – 600 = 158
(rounded off to rupee).

QUESTION 10:
What is hurdle rate?

a. It is the internal rate of return of a project.

b. It is the rate at which the payback period is estimated by discounting the future cash flow.

c. It is the minimum rate of return on equity from a project for it to be favorably considered.

d. It is the minimum rate of return that a project must generate for it to be acceptable by a
company.

Correct Answer: d

Detailed Solution:

The hurdle rate is the minimum rate of return from a project for it to be acceptable for taking up
by a company. It is the weighted average cost of capital of a particular company and some
premium based on the risk associated with specific project.