me 45. The profitability index (Pl) is calculated by dividing the present value of cash flows by the a. b. c. Future value of the initial investment Present value of the initial investment The initial investment 46. The regular payback period is defined as the number of years required to recover a project's cost. It does not consider: a. b c. Risk and return The time value of money The weighted average cost of capital 47. The most important and most difficult step in analyzing a capital budgeting project is estimating: a. The opportunity costs b. Externalities c. The incremental after-tax cash flow 48. Which of the following is not included in a project's net cash flow a. Cash outlays for fixed assets b. Interest payments c. The tax shield provided by depreciation 49. Investment in an expansion project: a. b. c. Protects market share Generates new sales Reduces operating costs 50. Investment in a replacement project a. Protects market share b. Generates new sales c. Reduces operating costs 51. Risk is important to capital budgeting because it effects: a. b. c. The estimated after-tax cash flows the project will produce The tax shield provided by depreciation The discount rate also called the weighted average cost of capital 52. The three types of risk affecting capital budgeting are stand-alone risk, corporate risk and: a. Market risk b. Economic risk c. Global risk