1. Which of the following is the most difficult step in the capital budgeting process?
a. Determining how to finance the project
b. Interpreting the results
c. Applying the capital budgeting techniques
d. Estimating cash flows
2. Why should a risk averse manager select one project over another when both projects generate the same NPV?
a. Because the manager prefers the project which has higher standard deviation in its cash flows.
b. Because the manager prefers the project with less risky cash flows.
c. Because the manager prefers the project with the higher IRR.
d. Because the manager prefers the project which has more variance in its cash flows.