1. What is a sunk cost and an opportunity cost? What role does forecasting play in the decision making process? What would be the sunk costs and opportunity costs of buying a home?
2. Since NPV is conceptually the best tool for capital budgeting, why do you think multiple measures are used in practice?
3. Suppose the real rate is 10 percent and the inflation rate is 1.4 percent. What rate would you expect to see on a Treasury bill?