1. Due to rapid growth, a computer superstore is contemplating expanding by adding another location. Which of the following items should the financial officer not include in estimating the cash flow associated with this expansion?

	The company owns the land of the future site of the new location.
	The new location is expected to take sales away from the existing location.
	The company spent $100,000 six months ago in a major advertising campaign which will help get the new store become profitable sooner.
	All of these items should be included in the analysis

2. A manufacturing firm is planning on expanding its existing operations. The expansion project is significant and will require the firm to house the expansion in a different location. The firm is considering building on a lot they own across town. The lot is currently vacant and it was paid for nearly 20 years ago. Given this information, which of the following statements is correct?

	The lot is not an incremental cash flow because it is not being utilized at this time.
	The lot is an incremental cash flow because it represents a sunk cost.
	The lot is not an incremental cash flow because it has already been paid for.
	The lot is an incremental cash flow because it represents an opportunity cost

3. A strong liquidity position means that ______________.

	the firm uses little debt in its capital structure
	the firm is able to meet its short-term obligations
	the firm pays its creditors on-time
	the firm pays out a large portion of its net income in the form of dividends

4. An estimated WACC computed using some sort of proxy for the average equity risk of the projects in a particular business unit is known as the ____________.

	Business unit WACC
	Pure play beta
	Divisional WACC
	Component Cost

5. All of the following are reasons that one should be cautious in interpreting financial statements except ____________.

	Firms can take steps to over- or understate earnings at various times.
	It is difficult to compare two firms that use different depreciation methods.
	Financial managers have quite a bit of latitude in using accounting rules to manage their reported earnings.
	All of the above are reasons to be cautious in interpreting financial statements.

6. All of the following are incremental cash flows attributable to the project except _____.

	Opportunity costs
	Financing costs
	Substitutionary effects
	All of these are incremental cash flows

7. Which of the following will directly impact the cost of debt?

	Debt Ratio
	Coupon Rate
	Capital Structure
	Competition within the industry