1. Which of the following can be expected to create value without qualification?

I. Selling an underperforming project for more than its present value

II. Disposing of an underperforming project that is creating less present value than expected

III. Adding debt to the firm's capital structure

A. I only

B. I and II only

C. I and III only

D. II and III only

E. I, II, and III

F. None of the above

2. Which of the following statements is true concerning EVA?

I. EVA will be positive when the firm's return on capital is higher than its cost of capital

II. Management may be tempted to inflate current EVA by sacrificing future value creation

III. EVA measures the rate of return over a specific period of time

A. I only

B. II only

C. III only

D. I and II only

E. I and III only

F. II and III only