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1. The profitability index is computed by dividing theA) total cash flows by the initial investment.B) present value of cash flows by the initial investment.C) initial investment by the total cash flows.D) initial investment by the present value of cash flows.2. To avoid rejecting projects that actually should be accepted1. intangible benefits should be ignored.2. conservative estimates of the intangible benefits value should be incorporated into the NPV calculation.3. calculate net present value ignoring intangible benefits and then if the NPV is negative estimate whether the intangible benefits are worth at least the amount of the negative NPV.A) 1B) 2C) 3D) both 2 and 3 are correct3. The standard direct materials quantity does not include allowances forA) unavoidable waste.B) normal spoilageC) unexpected spoilageD) all of the above are included.4. A project with a zero net present value indicates that it isA) unacceptableB) profitableC) acceptableD) going to have an acceptable cash payback period.

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