1.Understanding NPV. When making financial decisions about a capital budgeting project that has uneven cash flows, one valuation technique is Net Present Value (NPV). Moreover, the rule for decision-making is often described as accepting a project only if it has a positive NPV. This rule means that a project with a positive NPV will accomplish the following:

A.create value for the firm's stockholders.

B.return the firm's initial cash outlay within six months.

C.return the firm's initial cash outlay within one year.

D.increase the current liquidity of the firm.

E.produce only positive cash flows every year.

2.Understanding Payback Period. Which one of the following statements is correct concerning the Payback Period as one technique for making financial decisions at the firm-level for capital budgeting projects?

A.An investment is acceptable if its calculated payback period is less than whatever a firm specifies for such a project.

B.An investment should be accepted if the payback amount is positive and rejected if it is negative.

C.An investment should be rejected if the payback amount is positive and accepted if it is negative.

D.An investment is acceptable if its calculated payback period is greater than some pre-specified period of time.

E.An investment should be accepted any time the payback period is less than the discounted payback period, given a positive discount rate.

3. Determine Payback Period. It will cost $3,200 to acquire a small ice cream cart. Cart sales are expected to be $1,500 per year for each of the next three years. After the three years, the cart is expected to be worthless. What is the payback period?