D) Diversifiable risk Answer: 11. Which of the following is NOT an example of systematic risk? A) Inflation B) Recession C) Management risk D) Interest rate risk Answer: 12. The risk-return relationship for each financial asset is shown on A) the capital market line. B) the New York Stock Exchange market line. C) the security market line. D) none of the above. Answer 13. Relevant incremental cash flows include A) sales captured from the firm's competitors. B) retained sales that would have been lost to new competing products. C) incremental sales brought to the firm as a whole. D) all of the above. Answer: 14. Which of the following would be considered a termination cash flow? A) The expected salvage value of the asset B) Any tax payments or refunds associated with the salvage value of the asset C) Recapture of any investment in working capital that was included as an incremental cash outlay D) All of the above Answer: 15. Which of the following best describe why cash flows are utilized rather than accounting profits when evaluating capital projects? A) Deducting interest expense from income and also including it in the discount rate would result in double counting. B) Cash flows reflect the timing of benefits and costs more accurately than accounting profits C) Cash flows are more stable than accounting profits. D) Both A and B. Answer 16. Which of the following is an example of a sunk cost? A) Overhead costs that are associated with a project B) Interest expense associated with a project C) Market study expenses incurred in order to decide if a firm should accept a project D) Depreciation expenses associated with a project Answer 17. Which of the following expenses should be included when estimating cash flows for investment