1. Using the payback period to measure the desirability of a project ignores the:

a. timing of a cash flow.

b. time value of money.

c. arbitrary cutoff point.

d. project's cost.

e. initial cash flow of a project.

2. The optimal capital structure for a company the uses some debt to fund its operations:

a. is the mixture of debt and equity financing that minimizes the weighted average cost of capital.

b. consists of equal amounts of debt and equity financing.

c. is 100 percent equity financing.

d. is 100 percent debt financing.

e. is the mixture of debt and equity financing that minimizes the firm's aftertax cost of debt.