1. How does the net present value model complement the objective of maximizing shareholder wealth?

2. When is it possible for the net present value and the internal rate of return approaches to give conflicting rankings of mutually exclusive investment projects?

3. When are multiple rates of return likely to occur in an internal rate of return computation? What should be done when a multiple rate of return problem arises?

4. Describe how the profitability index approach may be used by a firm faced with a capital rationing investment funds constraint.

5. What are the primary strengths and weaknesses of the payback approach in capital budgeting?

6. What are the primary objectives of the investment project postaudit review?

7. What is the likely effect of inflation on the level of capital expenditures made by private firms? What must the financial manager do to ensure that a firm's capital budgeting procedures will be effective in an inflationary environment?

8. What major problems can you foresee in applying capital budgeting techniques to investments made by public sector and not-for-profit enterprises or organizations?

9. What effect would you expect the use of MACRS depreciation rules to have on the acceptability of a project having a 10-year economic life but a 7-year MACRS classification?

10. What are the primary types of real options in capital budgeting? Give examples of each type.