A 10-year project requires an initial investment today of $5,000. It is expected to generate positive daily cash flows, which are summarized for the purpose of capital budgeting analysis as $850 at the end of each of the next 10 years. The firm uses the NPV method, but due to capital constraints also requires that projects have a payback period of no longer than 5 years for its projects. What is the payback period for this project considering its characteristics?

a. 5.12 years b. 5.88 years c. 6.00 years d. Unknown because no discount rate is given

2.

You pay $10,000 today to purchase an equity stake in a friend's business. You expect your equity stake will pay you $500 one year from today, $550 one year after that, then $605 the next year, etc. (you forecast cash flows will be annual and continue to grow 10% per year in perpetuity). What is the IRR of this investment opportunity?

	a.	10.0%
	b.	15.0%
	c.	20.0%
	d.	21.0%
	e.	None of the above