1. The primary advantages of the modified internal rate of return (MIRR) over the internal rate of return (IRR) include which of the following?

2. Which of the following is not considered a relevant cash flow when deter- mining incremental cash flows for a new project?

A. The use of floor space that is currently unused but available for any new project.

B. An increase in current assets (e.g., inventories) that would result if the project is undertaken.

C. Revenues from an existing service that would be lost if the new project was initiated.

D. The cost of a consultant's report concerning the feasibility of the project that was completed (and paid for) in the previous year.

E. Shipping and installation costs associated with the new project.

3. WeCare HMO is evaluating a new project. It has a coefficient of variation (CV) of 5, while the HMOs average project has a CV of 2-3. The businesss corporate cost of capital is 10 percent, and the typical adjustment for project risk is 3 percentage points. What is the appropriate project cost of capital?

4. Assume a healthcare organization is analyzing a capital investment project with greater risk than that of the organizations average project. Which of the following cost of capital alternatives would be most appropriate for analyzing the projects net present value?

A. The expected rate of inflation

B. The rate of return available on a money market fund in which the firm invests its short-term cash reserves

C. The rate of return available on a standard savings account because it is known with certainty

D. The corporate cost of capital

E. The rate of return available on an alternative investment opportunity of similar risk to the project being considered

5. Which of the following statements about project classifications is most correct?

A. Projects are classified by purpose, such as replacement projects.

B. Projects are classified by size, such as less than $1 million.

C. Projects are classified by life, such as less than 5 years.

D. Answers (a) and (b) are correct.

E. Answers (a), (b), and (c) are correct.