1. What is the profitability index of a project with a NPV of $100.11 and an initial cost of $35.72? (Answer in hundredths)

2. What is the IRR for the following cash flow stream? (Blackboard will yell at you about the units (%), when tested it looks like adding the units or leaving the units off of this problem makes no difference in the grading. Do NOT answer in decimal form!) Year 0: $-5065 --- Year 2: $2399 --- Year 7: $2156 --- Year 9: $2530

3. What is the payback period (in annual terms) of the following cashflow stream?

Year 0: $-1,375.87

Year 4: $259.79

Year 7: $338.53

Year 11: $537.25

Year 15: $152.91

Year 20: $803.04

QUESTION 2 Consider the following two projects: Project Year 0 Year 1 Year 2 Year 3 Year 4 Cash Flow Cash Flow Cash Flow Cash Flow Cash Flow . -100 50 60 N/A B -73 30 30 Assume that projects A and B are mutually exclusive. The correct investment decision and the best rationale for that decision is to Discount Rate 0.11 0.11 40 30 30 a. invest in project A, since NPVB IRRA C. invest in project B, since NPVB > NPVA d. invest in project A, since NPVA > 0