1. The EAC method of evaluating projects applies when which of the following project characteristics exist? I. The projects are mutually exclusive II. The projects have different economic lives III. The projects will be replaced more or less indefinitely a. III only b. I and II only c. I and III only d. II and III only e. I, II, and III 2. A firm is considering a project which would increase accounts receivable by $10,000, accounts payable by $35,000, and inventory by $30,000. Which of the following is true? a. Net working capital has increased. b. Sales will increase. c. Payments to creditors will slow. d. Net working capital has decreased. e. This is a net source of cash. 3. The possibility that errors in projected cash flows can lead to incorrect NPV estimates is called: a. Forecasting risk. b. Projection risk. c. Scenario risk. d. Monte Carlo risk. e Accounting risk. 4. An analysis of what happens to NPV estimates when only one variable is changed is called: a. Forecasting analysis. b. Scenario analysis. c. Sensitivity analysis. d. Simulation analysis. e. Break-even analysis. 5. An analysis of what happens to NPV estimates when many variables take on many different values simultaneously is called: a. Forecasting analysis. b. Scenario analysis. c. Sensitivity analysis. d. Simulation analysis. e. Break-even analysis. 6. The degree to which a firm or project relies on fixed production costs is called its: a. Operating leverage. b. Financial break-even. c. Contribution margin. Page 1