1. What concerns could an analyst have about using return on equity to evaluate firm performance?
1 ROE focuses on the projected cash flows instead of on accounting income
2 ROE reflects all probjects undertaken by the company rather than just the most recent ones
3 ROE can be influenced by the company’s choice of accounting practices
1 only
1 and 2 only
2 and 3 only
1,2 and 3
2. Which of the following is the proper response to under performing projects?
1 Sell or scrap the project if the project’s PV is negative
2 Scrap the project if the revised NPV is less than the original NPV
3 Sell the project if the amount received is greater than the projects present value
a 1 and 2 only
b 1 and 3 only
c 2 and 3 only
d 1,2, and 3