1.

Part A) Which of the following is true regarding capital budgeting?

A) Capital budgeting is related to the composition of the companys liabilities and equity B) A company should always invest in projects with positive ROI C) The key metrics in evaluating capital budgeting decisions are ROI and cost of capital(WACC) D) A company should invest in new machinery if it will result in higher profit margins E) An investment to build inventory is an example of a capital budgeting decision

Part B)

If a company shifts current costs to a future period (which is a financial shenanigan), what will be the effect on financial ratios (assuming all else is constant)?

A) Profit margins in the current period will be higher B) Profit margins in the next period will be higher C) Total assets on the common size balance sheet will be higher D) Cash balances will be lower in the current period E) Shareholders Equity will be lower for the current period