1. Which of the following statements about the qualitative approach to project risk assessment is most correct?

A. Typically, yes answers are assigned one point and no answers zero points.

B. All of the above statements are correct.

C. Typically, qualitative risk assessment is used in conjunction with a quantitative risk assessment (as opposed to in place of a quantitative risk assessment).

D. The higher the score, the greater the risk.

E. Qualitative risk assessment involves the answers to a series of yes/no questions.

2. The nature of a projects component cash flow distributions and their correlation with one another determine a projects?

A. None of the above answers is correct.

B. market risk.

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

D. stand-alone risk.

E. corporate risk.

3. Which of the following statements about capital budgeting risk analysis techniques is false?

A. Payback period provides a rough measure of a projects liquidity.

B. Payback period provides a rough measure of a projects risk.

C. Scenario analysis can provide a quantitative measure of a projects risk.

D. Scenario analysis usually is based on four scenarios.

E. Scenario analysis gives managers an idea of the worst possible outcome.

4. Chronic Pain Clinic has estimated the following cash flows associated with a new project. The project cost of capital (discount rate) is 10 percent.

A. Year 0: ($800,000)

B. Year 1: $400,000

C. Year 2: $400,000

D. Year 3: $400,000

5. What is the projects net present value?

A. $126,897

B. $246,992

C. $224,538

D. $207,223

E. $194,741

6. A clinics management has estimated the net present value (NPV) for a proposed project at $15,000. All else held constant, which of the following would increase the projects estimated NPV?

A. An increase in the projects risk

B. An increase in the corporate cost of capital

C. An increase in the initial investment cost

D. None of the above answers is correct

E. A two-year delay in the receipt of the projects initial net operating cash flows (assuming the expected cash flows are positive)