4. It will cost $3,000 to acquire a small ice cream cart. Cart sales are expected to be $1,400 a year for three years. After the three years, the cart is expected to be worthless as that is the expected remaining life of the cooling system. What is the payback period of the ice cream cart? A. 0.83 years. B. 1.14 years. C. 1.83 years. D. 2.14 years. E. 2.83 years 5. The payback period rule: A. determines a cutoff point so that all projects accepted by the NPV rule will be accepted by the payback period rule. B. determines a cutoff point so that depreciation is just equal to positive cash flows in the payback year. C. requires an arbitrary choice of a cut-off point. D. varies the cut-off point with the interest rate. 6. You are considering two mutually exclusive projects with the following cash flows. Will your choice between the two projects differ if the required rate of return is 8 percent rather than 11 percent? If so, what should you do? Year Project Project B 0 -S240,000 -198.000 LS 0 S110.800 2 S 0 S 82.500 $325.000 S 45.000 A. Yes; Select A at 8 percent and B at 11 percent. B. Yes; Select B at 8 percent and A at 11 percent. C. Yes; Select A at 8 percent and select neither at 11 percent. D. No; Regardless of the required rate, project A always has the higher NPV. E. No; Regardless of the required rate, project B always has the higher NPV. 7. All else constant, the net present value of a project increases when: A. The discount rate increases. B. Each cash inflow is delayed by one year. C. The initial cost of a project increases. D. The rate of return decreases. E. All cash inflows occur during the last year of a project's life instead of periodically throughout the life of the project