1. Which of the following is true regarding the payback method?
a) It favors projects with longer payback periods.
b) It can be used to measure the liquidity of an investment project.
c) It ignores depreciation tax shelter.
d) It is not applicable to projects with unequal lives.
e) It requires trial and error method to compute payback period for an investment project.
2. The IRR calculation implicitly assumes that all cash flows are reinvested at a rate of return equal to the:
a) firm's cost of capital.
b) 10-year Treasury security yield.
c) firm's cost of equitty.
d) the internal rate of return on the particular project examined.