A project costs $75 000 and has an operating cash flow of $10 000 in the first two years and $30 000 in the following three years. The project stops at the end of year five. The expected return on market index is 14% and the risk-free rate is 5%. Assume there are no taxes. 2.1. Using the payback rule, is this project worthwhile with a payback of 3 years Discuss the advantages and disadvantages of the payback rule. Would you go with the recommendations of the payback rule in this case? Explain. (5 points) 2.2. Suppose the operating cash flow consists of both revenues and costs, and suppose the expected revenue each year is 120% of the net expected operating cash flow given above, while the expected costs each year are 20% of the net expecting operation cash flow. You should assume that the costs are uncorrelated with the movements of the market index. The revenues have a beta of 0.75. Work out an NPV of the project. (10 points) A project costs $75 000 and has an operating cash flow of $10 000 in the first two years and $30 000 in the following three years. The project stops at the end of year five. The expected return on market index is 14% and the risk-free rate is 5%. Assume there are no taxes. 2.1. Using the payback rule, is this project worthwhile with a payback of 3 years Discuss the advantages and disadvantages of the payback rule. Would you go with the recommendations of the payback rule in this case? Explain. (5 points) 2.2. Suppose the operating cash flow consists of both revenues and costs, and suppose the expected revenue each year is 120% of the net expected operating cash flow given above, while the expected costs each year are 20% of the net expecting operation cash flow. You should assume that the costs are uncorrelated with the movements of the market index. The revenues have a beta of 0.75. Work out an NPV of the project. (10 points)