1)When a manager analyzes a project using only the incremental cash flows related to the project, the manager is following the _____ principle.

	a.	Side effect.
	b.	Stand-alone.
	c.	Erosion.
	d.	Opportunity.
	e.	Net present value.

2)A new project is expected to have the following effects on the financial statements of a firm. The effect of a decrease in accounts receivable should be included in the net working capital requirements for the project.

True

False

3) A company is evaluating the replacement of the office copier. The selling price of the existing copier should be considered in that evaluation.

True

False

4) The EAC method for evaluating projects applies when the projects have different economic lives.

True

False

5) Which of the following is generally true about a firm's cost of debt?

	a.	It is equal to the yield to maturity on the firm's outstanding bonds.
	b.	It is greater than the average coupon payments on outstanding debt.
	c.	It is greater than the cost of equity.
	d.	It normally cannot be observed, directly or indirectly, in the marketplace.
	e.	It is equal to the coupon rate on the firm's outstanding bonds.