Payback Period Method in Capital Budgeting

What is the primary purpose of a Gantt chart in energy management projects?

To show the logical interdependencies between tasks
To display the time resolution of a project
To visualize the time unit of a project
To track the progress of tasks and schedule them (correct)

What does the length of a bar in a Gantt chart represent?

The complexity of the task
The resources required for the task
The duration of the task (correct)
The priority of the task

What is the typical time unit used in a Gantt chart?

Weeks or months (correct)
Hours
Days
Years

What is a limitation of a Gantt chart?

It does not show the logical interdependencies between tasks (D) Signup and view all the answers

What is the purpose of the rows of bars in a Gantt chart?

To show the beginning and ending dates of individual tasks (A) Signup and view all the answers

What is an alternative to a Gantt chart for showing logical interdependencies between tasks?

Network diagram (B) Signup and view all the answers

What is the primary criterion for selecting an investment?

Select the investment with the highest rate of return (B) Signup and view all the answers

What does a shorter payback period generally indicate?

A more attractive investment (C) Signup and view all the answers

What is the main advantage of using the IRR method?

It takes into account the time value of money (C) Signup and view all the answers

What is a limitation of the payback period?

It does not consider savings accrued after the payback period (D) Signup and view all the answers

Why might a high internal rate of return not necessarily be desirable?

Because the method cannot distinguish between lending and borrowing (C) Signup and view all the answers

What type of process is determining the IRR?

Iterative process requiring guesses and approximations (D) Signup and view all the answers

What does ROI express?

The annual return expected from a project (A) Signup and view all the answers

What is a requirement for a project to be considered attractive based on ROI?

ROI must be higher than the cost of money (A) Signup and view all the answers

What is a key difference between NPV and IRR methods?

NPV assumes a known discount rate, while IRR does not (D) Signup and view all the answers

Why might a businessman prefer to use the IRR method?

Because it makes sense to think in terms of rate of return (D) Signup and view all the answers

What is an advantage of using ROI?

It is a simple method and easy to calculate (A) Signup and view all the answers

What is the ROI of an investment that generates an after-tax cash flow of Rs. 25,000 over six years, with an initial investment of Rs. 100,000?

25% (B) Signup and view all the answers

What is one of the key duties of an Energy Manager in terms of reporting?

Report to BEE and State level Designated Agency once a year (A) Signup and view all the answers

What is the purpose of establishing an improved data recording system?

To keep track of energy consumption (C) Signup and view all the answers

What is the role of an Energy Manager in supporting energy audits?

Provide support to Accredited Energy Audit Firm (A) Signup and view all the answers

What is the primary goal of implementing energy efficiency improvement projects?

To improve energy efficiency and conservation (B) Signup and view all the answers

What is the purpose of participating in information exchange with other energy managers?

To share best practices in energy management (C) Signup and view all the answers

What is the objective of preparing a scheme for efficient use of energy?

To ensure economic stability of the investment (C) Signup and view all the answers

What type of companies usually provide a complete energy project service?

Energy service companies (ESCOs) (B) Signup and view all the answers

What is unique about energy performance contracting?

The contractor is paid based on the performance (D) Signup and view all the answers

What type of fee contract involves the ESCO conducting an audit, designing the project and assisting the customer for a fixed lump-sum fee?

Fixed fee contract (D) Signup and view all the answers

What is the primary benefit of energy performance contracting for industries?

Improving energy efficiency with little upfront cost (A) Signup and view all the answers

What type of contract involves the ESCO sharing the savings with the customer?

Shared savings contract (D) Signup and view all the answers

What is the primary role of an ESCO in energy performance contracting?

Providing financing and project management services (B) Signup and view all the answers