1. What concerns could an analyst have about using return on equity to evaluate firm performance?

1 ROE focuses on the projected cash flows instead of on accounting income

2 ROE reflects all probjects undertaken by the company rather than just the most recent ones

3 ROE can be influenced by the company’s choice of accounting practices

1 only

1 and 2 only

2 and 3 only

1,2 and 3

2. Which of the following is the proper response to under performing projects?

1 Sell or scrap the project if the project’s PV is negative

2 Scrap the project if the revised NPV is less than the original NPV

3 Sell the project if the amount received is greater than the projects present value

a 1 and 2 only

b 1 and 3 only

c 2 and 3 only

d 1,2, and 3