1. Brookhaven Enterprises Inc. is analyzing a project that requires $1,600,000 of fixed assets. When the project ends, those assets are expected to have an aftertax salvage value of $803,000. How is the $803,000 salvage value handled when computing the net present value of the project?

	A.	Cash inflow prorated over the life of the project
	B.	Cash inflow in the final year of the project
	C.	Cash outflow for the year following the final year of the project
	D.	Excluded from the net present value calculation
	E.	Reduction in the cash outflow at Time 0

2. You are considering an investment with the following cash flows. If the required rate of return for this investment is 11%, should you accept it based solely on the internal rate of return rule? Why or why not?

Year Cash Flow 0 -$98,000 1 $53,000 2 -$ 9,800 3 $78,000 4 -$ 3,000 

	A.	The IRR rule cannot be applied because the IRR is negative.
	B.	You cannot apply the IRR rule in this case because there are multiple IRRs.
	C.	no; because the IRR is less than the required return
	D.	no; because the IRR is negative.
	E.	yes; because the IRR is greater than the required return

3. Which of the following bonds has the most interest rate risk?

	A.	6-year maturity; 4 percent coupon bond
	B.	6-year maturity: 7 percent coupon bond.
	C.	10-year maturity; 4 percent coupon bond.
	D.	12-year maturity; 4 percent coupon bond
	E.	12-year maturity; 7 percent coupon bond.