1. The primary advantage of accelerated depreciation over straight-line depreciation is that the total, undiscounted, depreciation tax savings over the life of the project are greater when an accelerated. depreciation method is used. , 2. Suppose a firm is considering production of a new product whose projected sales include sales that will be taken away from another product the firm also produces. The lost sales on the existing product are a sunk cost and are not a relevant cost to the new product. Multiple-Choice 1. Assume a project has normal cash flows (i.e., the initial cash flow is negative, and all other cash flows are positive). Which of the following statements is most correct? a. All else equal, a project's IRR increases as the cost of capital declines. b. All else equal, a project's NPV increases as the cost of capital declines. c. All else equal, a project's MIRR is unaffected by changes in the cost of capital. d. Answers a and b are correct. c. Answers b and c are correct. the project 2. A major disadvantage of the payback period method is that it a. Is useless as a risk indicator. b. Ignores cash flows beyond the payback period. c. Does not directly account for the time value of money d. All of the answers above are correct e. Only answers b and c are correct. e of olon Wk of de detae the estoon for $2 n 3. Two mutually exclusive projects each have a cost of $10,000. The total, undercounted cash flows from Project L are $15,000, which the undercounted cash flows from Project S total $13,000. Their NPV profiles cross at a discount rate of 10%. Which of the following statements best describe this situation? a. The NPV and IRR methods will select the same project if the cost of capital is greater than 10%; for example, 18% The NPV and IRR methods will select the same ample, 8%. To determine ifa ranking conflict will occur between the two projects the cost of capital is needed as Jl as an additional piece of information. Project L should be selected at any cost of capital, because it has a higher IRR. oject S should be selected at any cost of capital, because it has a higher IRR. project if the cost of capital is less than 10%; for