2. How many of the following statements about cash flow from assets (CFFA) is correct? When evaluating a new project, we should use incremental CFFA. Financing costs affects CFFA. Taxation affects CFFA. Change in net working capital affects CFFA. Your choice: d. Four. a. One; b. Two; c. Three; 3. Which of the following statements about U.S. financial market history is wrong? a. Historically, the S&P 500 stock index return is higher than the long-term U.S. government bond returns. b. Stock market volatility is in general higher than that of government bonds. c. In a recession, stock market valuation decreases. d. Small company stocks on average yield lower returns than large company stocks. 4. Suppose you are a manager, and you are buying a new machine to replace an old machine at year 0. Which one of these should be included in the change of net working capital at year 0? a. Loan obtained to finance the purchase of the machine b. Initial investment in inventory to support the machine c. The annual depreciation of the machine. d. Purchase cost of the machine. e. Salvage value of the old machine. 5. How many statements below about expectations are correct? (1) The expectation of a random variable is a simple geometric average of all the possible realizations. (2) If an event is never going to happen, then what happens during that event does not affect our expectation. (3) Expectation of a stock return is affected by the probability distributions of different outcomes. (4) If the expectation of Google stock return is smaller than the expectation of Tesla stock return, then the realized Google stock return is always smaller than that of Tesla. Your choice: a. one; b. two; c. three; d. four