1. Project A has an NPV of $150,000 and an IRR of 15%. Project B has an NPV of $25,000 and an IRR of 60%. The projects are independent. Which project(s) should the firm choose?

a. Project A b. Project B c. Both d. Neither

2. Suppose the projects from the previous question are mutually exclusive. Which project should the firm choose?

a. Project A b. Project B c. Both d. Neither

3. Projects C and D have identical expected cash flows, but project C is much riskier. Which project should add more value to the firm?

a. Project C b. Project D

4. Projects E and F have similar expected cash flows, but project Es cash flows are less correlated (lower beta) with the firms other projects. Which project will shareholders prefer?

a. Project E b. Project F