1. You know that two mutually exclusive projects are of different sizes. The smaller project is known to have a positive NPV. Which one of these accurately describes a method of properly determining which one, if either, project should be accepted?
Accept the smaller project without any further analysis
Select the project with the higher profitability index
Accept the project with the shorter payback period
Accept the larger project if the incremental IRR exceeds the discount rate
Select the project with the higher internal rate of return
2. Which of the following is (are) true?
1) Current assets, current liabilities, and cost of goods sold are often modeled as increasing proportionately with sales because these three items often physically increase as sales increase
2) Current assets, current liabilities, and cost of goods sold are often modeled as increasing proportionately with sales only because it makes financial analysis simple
3) If cost of goods sold does not increased with sales then it should not be modeled as increasing proportionately with sales.
4) Both a and c.