37 If 2 projects are mutually exclusive, then you may pick both of them, one of them and/or neither of them depending on your decision criteria outcomes. a. True b. False s.10 NPV 38 Normal (a.k.a. conventional cash flow. i.e. costs followed by cash inflows) Projects Q and R have the same NPV when the discount rate is zero. However, Project Q has larger early cash flows that R. Therefore, we know that at all discount rates greater than zero Project Q will have a than R. (Hint: With larger early CFs, Q is effectively shorter term than R. Which is more sensitive to changes in interest rated in an NPV profile?) a greater. b. smaller. c. equal, since they have the same NPV when the discount rate is zero. d. you need to know the interest rate to answer this question. e. you need to know the actual cash flows to answer this question. 39 All of the following are advantages of debt financing except which one? a. Interest is a tax-deductible expense b. It allows for the use of other people's money in financing a business C. It results in loss of ownership control of the business. d. The cost of debt financing is generally cheaper than equity financing. e. Owners do not have to share the potential gains of the business, since debt only requires repayment of the amount owed. 40 In which of the following situations would you get the largest benefit from diversifying your investment across two stocks? a. there is perfect positive correlation. b there is perfect negative correlation. c. there is modest positive correlation. d. there is modest negative correlation. e. there is not correlation