1. Describe the reinvestment rate problem associated with comparing projects using the internal rate of return.

2. If a firm's statement of cash flows shows that cash was used for investments, which of the following would seem most likely?

A) The inventory balance increased

B) Common stock was repurchased

C) New machines were acquired

D) Cash dividends were paid

3. Flow-based insolvency is when:

a. Operating cash flow is insufficient to meet current obligations

b. A negative equity position

c. A negative net income

d. A firm is able to pay its debts