1. LaPango Inc. estimates that its average-risk projects have a WACC of 10%, its below-average risk projects have a WACC of 8%, and its above-average risk projects have a WACC of 12%. Which of the following projects (A, B, and C) should the company accept?

a.Project B, which is of below-average risk and has a return of 8.5%.

b.Project C, which is of above-average risk and has a return of 11%.

c.Project A, which is of average risk and has a return of 9%.

d.None of the projects should be accepted.

e.All of the projects should be accepted.

2. Which of the following statements is NOT CORRECT?

a.Credit policy has an impact on working capital because it influences both sales and the time before receivables are collected.

b.The cash budget is useful to help estimate future financing needs, especially the need for short-term working capital loans.

c.If a firm wants to generate more cash flow from operations in the next month or two, it could change its credit policy from 2/10 net 30 to net 60.

d.A company may hold a relatively large amount of cash and marketable securities if it is uncertain about its volume of sales, profits, and cash flows during the coming year.