11. You are provided the projected IS of a project & you are asked to determine its cash flow for the purpose of evaluating it. Which of the following statements is true?

a. The cash flow of that project is earnings before interest & taxes (EBIT)

b. The cash flow of that project is net income + depreciation + interest expense

c. The cash flow of that project is EBIT + depreciation - taxes

d. Statements b & c are true

e. None of the above

24. We discussed in class that managers should see investment projects as options. Often times, a project is available now & later. In that perspective, other things held constant, when the uncertainty regarding the projects profitability decreases, ___

a. the value of the option to wait decreases

b. the value of the option to wait increases

c. the value of the option to wait will not change since the net of the different effects will be neutral

d. one cannot predict a certain effect on the value of the option to wait since this latter is not related to changes in the uncertainty regarding the projects profitability

10. Which if the following statements is true?

a. Other things constant, when a firm increases its product prices to improve its profit margin, it increases its ability to grow without having to obtain additional external financing (such as issuing shares.) However, by increasing its product prices, its actual sales growth rate is likely to decrease.

b. Other things constant, an increase in the firms accounts payable to suppliers helps it meet the need for additional NWC as it grows its sales. However, it can be a very costly method of financing growth.

c. Other things constant, improvements in the firms accounts receivables collection, inventory management & fixed assets utilization help it meet the need for additional NWC as it grows its sales rapidly.

d. All of the above statements are true