1. A project's cash flows are as follows: at time zero, -200K, at time one, +100K, at time two, + 100K, at time three, -600K, at time four +900K. What is the maximum number of IRR's that there could be for this project?

A. Three B. Two C. One D. Zero

2. Last year, Bubbly Booze Corporation (BBC) had EBIT of $9,500, depreciation of $7,000 and taxes of $1,000. What was BBC's operating cash flow?

A. $1,500 B. $8,000 C. $9,500 D. $15,500

3. The government is considering purchasing a new, advanced missile that that the development of which has been funded by the government. One argument in favor of buying the new missiles, voiced by the Defense Secretary, is that, since so much has already been spent on its development, it would be a waste of money not to buy it now. The problem with this argument is that it includes __________________ in the decision making process.

A. Erosion costs B. Sunk costs C. Financing costs D. Opportunity costs

4. When a new project's positive cash flows come, to some extent, at the expense of other of the firm's projects, we should include __________________________ in our analysis of the new project.

A. Salvage value B. Erosion costs C. Financing costs D. Sunk Costs