1. Project selection ambiguity can arise if one relies on IRR instead of NPV when:

a. The first cash flow is negative and the remaining cash flows are positive.

b. A project has more than one NPV.

c. The profitability index is greater than one.

d. Project cash flows are not conventional.

2. Which of the following statements is true?

a. If a project has a profitability index less than one the project should be accepted.

b. If the cost of capital is greater than the IRR, the project should be accepted.

c. If a project has a payback which is longer than the company requires, the project should be accepted.

d. If the NPV of a project is positive, it should be accepted.

3. ___________ is at the heart of corporate finance because it is concerned with making the best choices about project selection.

a. Capital budgeting

b. Capital structure

c. Payback period

d. Short-term budgeting

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