determine if the following statements are true false or uncertain and give the raison 1. The optimal scale of a project is the scale at which the NPV of each additional increment to scale decreases.

2. To choose the optimal scale of a project, the marginal internal rate of return must be roughly equal to opportunity cost of funds invested in a project.

3. The optimal time to start a project when the benefits are increasing during the projects life while the investment costs are not a function of time, is when the return on capital invested is smaller than the benefits that the project would generate in period t+1 if they were invested in the project in period t.

4. When both benefits and costs are functions of calendar time, the project must start when the benefits in period t+1 that the project would generate if they invested the money today are smaller than the return on capital in period t.

5. When the projected benefits are varying over time, the operation of the project should be continued if the difference between the return on the salvage value of the project in period t and the change in the salvage value of the project in period t+1 is positive.

6. When dealing with mutually exclusive projects, one should select the project that yields the highest NPV regardless of the duration of the project life.

7. When dealing with two mutually exclusive projects with different lengths of life, one should choose the project that can be repeated the most rather than adjusting the benefits and costs to be comparable.

8. From the investors point of view, a viable project must repay the principal and interest on loans.

9. From the lenders point of view, the increase in account payables will contribute positively to the net cash flow generated by the project but it will decrease the net cash flow from the investors point of view.

10. The debt service coverage ratio measures the ability of the project to generate sufficient cash flows to meet the debt service obligations in case the project faces difficulties in any of the project debt service periods.

11. The gross benefits generated by the project that are available to meet its debt service obligations are defined as DSCR.

12. LLCR can be derived by dividing the PV of net cash flows from the beginning of the project until the last period of its operation by PV of debt service for from the first period of operation until the last period.

13. Both DSCR and LLCR are used by the banker to decide whether to make a bridge financing agreement or not.

14. Decreasing the interest rate on the loan while increasing the debt service duration will help to improve the DSCR.

15. The bank can use the debt service reserve account regardless of the projects ability to meet its debt service obligations.