Expected Net Cash Flows
Year	Franchise L	Franchise S
0	$100	$100
1	20	75
2	55	48
3	88	26

1) What is the payback period? Find the paybacks for Franchises L and S.

(2) What is the rationale for the payback method? According to the payback criterion, which franchise or franchises should be accepted if the firms maximum acceptable payback is 2 years and if Franchises L and S are independent? If they are mutually exclusive?

(3) What is the difference between the regular and discounted payback periods?

(4)What is the main disadvantage of discounted payback? Is the payback method of any real usefulness in capital budgeting decisions?