22. Payback and NPV.

a. What is the payback period on each of the following projects? (LO3)

b. Given that you wish to use the payback rule with a cutoff period of 2 years, which projects would you accept? (LO3)

c. If you use a cutoff period of 3 years, which projects would you accept? (LO3)

d. If the opportunity cost of capital is 10%, which projects have positive NPVs? (LOI)

e. "Payback gives too much weight to cash flows that occur after the cutoff date." True or false? (LO3)

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Cash Flows (dollars) Project Year: 0 1 2 3 4 A -5,000 +1,000 +1,000 +3,000 0 B -1,000 0 +1,000 +2,000 +3,000 -5,000 +1,000 +1,000 +3,000 +5,000