#1) What is not a disadvantage of using the Discounted Payback Period Method?

a)Will never reject positive NPV projects

b)Difficult to explain

c)Uses an arbitrary benchmark

d)Biased against long term project

e) none of the above

#2) PayPal is considering an update to its app. The update would cost 10 million dollars today, and 6 million dollars 1 year from now. In years 2-6, the update would increase PayPal's cash flows by 8 million dollars. What is the IRR of this project?

#3)Southwest Airlines is considering buying a new Boeing 737. The airplane will cost 29 million dollars today and then generate 10 million dollars per year for the next 13 years. After 13 years, the airplane will not generate any cash for Southwest Airlines. If the cost of capital is 10%, what is the NPV (in millions of dollars) of buying the new airplane?

#4

Suppose a project has a positive NPV. What can you say about the project's IRR?

		a) IRR will be greater than the cost of capital
		b) IRR will be equal to the cost of capital
		c) IRR will be less than the cost of capital
		d) Not enough information to say anything about IRR