1. A and B are two projects with the same Internal Rate of Return and expected life span. Which is the following factors is the most likely explanation for A having a higher NPV than B

1. A has a larger initial outlay than B
2. The two projects are mutually exclusive
3. B has a larger initial outlay than A
4. A is more risky than B and therefore has a higher discount rate

2. Which of the following is false concerning mutually exclusive projects

1. Mutually exclusive projects may utilize the same scarce physical resources
2. Acceptance of one project means that the other projects will be rejected
3. Mutually exclusive projects may perform the same risk
4. None of the above

3. A lender who becomes the owner of inventory is referred to as a bailee

True

False

4. Certainty equivalent is the amount of cash the decision maker would be willing to trade for the risky cash flow?

True

False

5. The optimal capital structure is the mix of contracted debt and equity that minimizes the probability of bankruptcy

True

False

6. The is a positive relationship between present value and the discount rate

True

False