1. Consider a BORROWING capital budgeting project. Which of the following would indicate that the projects profitability index is less than one?

	a.	The present value of the benefits is less than the present value of the costs
	b.	The present value of the benefits is equal to the present value of the costs
	c.	The projects IRR is less than the required rate of return
	d.	The project has a very short payback period
	e.	The present value of the benefits is greater than the present value of the costs

2. Which of the following values comes closest to the payback of a project that requires an initial investment of $155, produces cash flows of $12 for 5 consecutive years beginning at the end of year 1, and provides a final cash flow at the end of year 6 of $100? The projects required rate of return is 10%.

	a.	6 years
	b.	5 years
	c.	4 years
	d.	3 years
	e.	Undefined there is no payback for this project.