1. The purpose of capital budgeting is to: A. avoid all projects that involve risk. B. Invest in projects that will provide stockholders with the highest return regardless of the risk of the project. C. Invest in projects that pay back in the shortest period of time. D. Invest in assets that will, at minimum, provide investors with their required return. 2. A company must choose between two mutually exclusive projects. Project A is a short-term project. Project B is a long-term project. The hurdle rate is 8% and the crossover rate is 7%. Which project should be chosen? A. Choose project A. B. Choose project B. C. Both Projects are acceptable. D. Not enough information to determine. 3. You are considering a project which has an internal rate of return that is equal to the hurdle rate. Which of the following is FALSE? A. The project is returning the minimal amount that is acceptable to its investors. B. The present value of the project's cash flows is equal to its initial Investment. C. The project will create value. D. The project has a profitability index that is equal to 1.0. 4. Which of the following will result in the higher NPV, all else equal? A. Depreciating the project's asset straight-line to a salvage value of $50,000 over its 4-year life. B. Depreciating the project's asset straight-line to zero over its 4-year life