1. You and your colleague, Michael, are debating how to best handle a large expenditure on a piece of machinery as a capital budgeting decision. Michael says that his accounting background suggests that because the benefits of this large piece of machinery will be realized over the project's ten-year life, so should its costs. Discuss why you disagree or disagree with Michael.

2. What are some potential problems in using internal rate of return (IRR) for mutually exclusive projects?

3. Should financing costs be included as an incremental cash flow in capital budgeting analysis? Please explain.