1)

Which one of these statements is correct?

• All allocated costs should be included in the initial cost of a project.

• Synergy occurs when a new product reduces the sales of a current product.

• Costs incurred prior to deciding whether or not to produce a new product are sunk costs.

• Incremental costs should not be included in a projects initial cost estimate.

• Sunk costs should be included in the initial cost of a project.

2)

Computers used for business purposes are assigned to which MACRS property class?

• 15-year

• 7-year

• 5-year

• 10-year

• 3-year

3)

Which one of these is a disadvantage of sensitivity analysis?

• Each variable in sensitivity analysis is treated in isolation.

• A sophisticated computer program is required to conduct sensitivity analysis.

• Sensitivity analysis may decrease the false sense of security among managers.

• Sensitivity analysis assumes most variables will achieve their most optimistic value.

• Sensitivity analysis fails to identify the key variable that affects a project's net present value.