Question 1. What happens to a firm that fails to earn at least its cost of capital on the investments it makes?
Question 2. Under what circumstances would a project’s NPV profile cross the x-axis more than one time?
Question 3. Are sunk costs included in the cash flow figures used in capital budgeting analysis? Explain.
Question 4. What kind of risk increases as a firm piles more debt onto its balance sheet?
Question 5. Define “mutually exclusive projects.”