1. Which of the following is the ultimate decision rule for a project analysis?

A. profitability index rule B. payback period rule

C. internal rate of return rule

D. net present value rule

2. Which one of the following is the best example of two mutually exclusive projects? A. building a retail store that is attached to a wholesale outlet B. using an empty warehouse to store both raw materials and finished goods C. promoting two products during the same television commercial D. waiting until a machine finishes molding Product A before being able to mold Product B

3. Which of the following is a disadvantage of the payback method of project analysis? A. easy to compute B. easy to use C. works well for firms that need liquidity D. arbitrary cutoff point (e.g. payback period must be less than 2 years)

4. The operating cash flow of a cost cutting project:

A. can be positive even though there are no increased sales.

B. is equal to zero because there are no incremental sales.

C. can only be analyzed by projecting the sales and costs for a firm's entire operations

D. is equal to the depreciation tax shield.