1. Which of the following is a use of cash?

___A. collecting a receivable ___B. decreasing inventory ___C. obtaining a bank loan ___D. paying a supplier for previous purchases ___E. all of the above

2. The management of Marcel's uses the firm's weighted average cost of capital (WACC) as the required return for projects similar to those of its existing operations. For projects of higher risk, it uses a rate equal to WACC plus 2 percent. For projects of lower risk, it subtracts 2 percent from its WACC. The firm is taking the _____ approach to assigning a required return to a project.

___A. objective ___B. subjective ___C. down play ___D. normative

___E. pure play

3.

Which of the following statements are correct?

I. A positive net present value signals an accept decision. II. Projects should be accepted when the profitability index is less than 1. III. A payback period that is less than the required period signals an accept decision. IV. When the internal rate of return exceeds the required return, a project should be

accepted.

___A. I and III only ___B. I, III, and IV only ___C. II, III, and IV only ___D. I, II, III, and IV ___E. I, II, and III only

4. You are analyzing a short-term project with conventional cash flows to determine if the project should be accepted. Which method of analysis should you use if you could only use one of the following methods to analyze the project?

___A. internal rate of return ___B. payback ___C. average accounting rate of return ___D. net present value ___E. profitability index