1. Discounting in cost benefit analysis is necessary because
(A) Money today is not the same as money tomorrow
(B) It addresses inflation
(C) It allows a systematic comparison of costs and benefits that occur at different times of the project’s life span
(D) Both B and C
(E) Both A and C
2. If the NPV of a project is less than zero, then the
(A) IRR is greater than the opportunity cost of capital
(B) IRR is less than the opportunity cost of capital
(C) IRR is equal to the opportunity cost of capital
(D) IRR is greater than the interest rate
(E) IRR is equal to the discount rate
3. The IRR approach to project evaluation may produce multiple solutions if
(A) If negative cash flows occur after positive cash flows
(B) When the project is simple
(C) The project’s life span is long
(D) If the project’s life span is short
(E) None of the above
4. Uncertainty in project evaluation refers to
(A) A possible occurrence of a bad outcome
(B) The absence of knowledge about outcomes or variables in a project
(C) The absence of understanding about the occurrence of a bad outcome
(D) Inability to value benefits and costs using the market approach
(E) None of the above
5. Salvage value is
(A) Normally included in cost benefit analysis
(B) Excluded from cost benefit analysis
(C) This is the value of assets considered worthless at the end of a given project
(D) Asset value that does not accrue to a given project
(E) Value of assets at the beginning of a given project