1. The ____ of a resource is its value in its best alternative use and is included in capital

budgeting analysis.

A. opportunity cost

B. sunk cost

C. incremental cash flow

D. none of these

2. For which of the following project types is cash flow estimation most difficult?

A. New Venture

B. Replacement

C. Expansion

D. New Market

3. Working capital to support the demands of a new project must be funded with cash. The assets

primarily associated with such working capital requirements include:

A. inventory and accounts receivable

B. machinery and equipment

C. land and buildings

D. all of these

4. To be accepted, projects that are unusually risky should have to earn Internal Rates of Return

that are ____ those earned by a firms typical projects.

A. higher than

B. lower than

C. equal to

D. similar to

5. For the purpose of calculating the cost of capital for a corporation, the capital components are

A. long term debt, common stock and preferred stock

B. long-term debt and common stock

C. debt and preferred stock

D. long-term and short-term debt

6. A firm that employs a relatively large proportion of debt in its capital structure will have a

relatively ____ degree of financial leverage.

A .High

B. Low

C. Insignificant

D. Constant