Consider the following projects:

Cash Flows ($)

Project C0 C1 C2 C3 C4 C5 A 1,000 1,000 0 0 0 0 B 2,000 1,000 1,000 4,000 1,000 1,000 C 3,000 1,000 1,000 0 1,000 1,000

a. If the opportunity cost of capital is 10%, which projects have a positive NPV?

b. Calculate the payback period for each project.

c. Which project(s) would a firm using the payback rule accept if the cutoff period were three years?

d. Calculate the discounted payback period for each project.

e. Which project(s) would a firm using the discounted payback rule accept if the cutoff period were three years?

AppendixLO1