1. When evaluating if a company should accept a new contract to produce more product it should:

A. Evaluate all possible fix cost of accepting the contract.

B. Evaluate the propose contract using a contribution margin approach.

C. Accept the new contract if the sales price for the product is equal to or higher than the current sale price.

D. Accept the new contract if fixed costs remain the same.

2. Long term debt financing:

A. Reduces financial leverage.

B. is used when Internal funds to fund capital projects are available.

C. Short term lines of credit to fund capital projects.

D. are used to fund long-term projects.

3. There are different methods use to determine the cost of capital and

included:

A. WACC, CAPM, Discounted Cash Flow and Management directed.

B. WACC, CAPM, NPVATCF and IRR.

C. PV of future dividends, Management directed, CAMSP

D. NPVATCF, MIRR and IRR

16. When evaluating capital projects, the following cost and revenues must be

taken in consideration:

A. All total costs and revenues associated with each project.

B. Only large costs and revenues that affect the project.

C. All costs and revenues that can be identified to the project.

D. Only relevant cost and relevant revenues associated with the projects.

17. When evaluating capital projects, the impact of taxes on future cash flows

has on a project:

A. Is not required because changes in the tax code do not affect the profitability of capital projects.

B. Are only taken into consideration in small short term projects because future tax rates cannot be identified.

C. Are irrelevant costs and have no bearing on the profitability of the project.

D. Have a major impact on the future cash flows of any capital project and

must be taken into consideration.

18. Present value analysis when used in conjunction with capital projects:

A. Is used to determine the present value of future cash flows.

B. Is not taken in consideration because it is not a relevant cost.

C. Is the future value of a cash flow.

D. None of the above.