Please answer two of the following questions. Questions should be answered in complete sentences and should be long enough to completely answer the question. Clearly state which question you are answering.

1. What are the important administrative considerations in the capital budgeting process?

2. Why does capital budgeting rely on analysis of cash flows rather than on net income?

3. What are the weaknesses of the payback method?

4. What is normally used as the discount rate in the net present value method?

5. What does the term mutually exclusive investments mean?

6. How does the modified internal rate of return include concepts from both the traditional internal rate of return and the net present value methods?

7. If a corporation has projects that will earn more than the cost of capital, should it ration capital?