1. Which of the following is should not be included in cash flows (CFFA) for capital budgeting projects?
A) Opportunity cost
B) Interest Expense
C) Taxes
D) Changes to Net Working Capital
E) Side Effects (such as erosion or synergies)
2. The use of WACC as the discount rate to select investments is acceptable when
A) the correlation of all new projects are equal.
B) NPV is positive when discounted by the WACC
C) the risk of the project is equal to the risk of the overall firm.
D) the firm is well diversified and the unsystematic risk is negligible.