Part 1:

Consider the following information:

	Cash Flows ($)
Project	C0	C1	C2	C3	C4
A	5,200	1,200	1,200	3,200	0
B	800	0	750	2,200	3,200
C	5,300	3,300	1,600	700	200

a. What is the payback period on each of the above projects? (Round your answers to 2 decimal places.)

Project	Payback Period
A	year(s)
B	year(s)
C	year(s)

b. Given that you wish to use the payback rule with a cutoff period of two years, which projects would you accept?

	None
	Project A
	Project A, Project B, and Project C
	Project A and Project C
	Project A and Project B
	Project B
	Project C
	Project B and Project C

c. If you use a cutoff period of three years, which projects would you accept?

	Project B
	Project A, Project B, and Project C
	Project A and Project C
	Project A
	Project B and Project C
	Project C
	Project A and Project B

d. If the opportunity cost of capital is 12%, which projects have positive NPVs?

	Project A, Project B, and Project C
	Project A
	Project B
	Project A and Project B
	Project A and Project C
	Project B and Project C
	Project C

e. If a firm uses a single cutoff period for all projects, it is likely to accept too many short-lived projects. True or false?

	True
	False

f-1. If the firm uses the discounted-payback rule, will it accept any negative-NPV projects?

	Yes
	No

f-2. Will it turn down positive-NPV projects?

	Yes
	No

Part 2:

Consider the following cash flows:

Cash Flows ($)
C0	C1	C2
7,650	5,400	19,800

a. Calculate the net present value of the above project for discount rates of 0, 50, and 100%. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

NPV @ 0%	$
NPV @ 50%	$
NPV @100%	$

b. What is the IRR of the project? (Do not round intermediate calculations. Enter your answer as a percent rounded to the nearest whole number.)

IRR %

Part3:

You have the chance to participate in a project that produces the following cash flows:

Cash Flows ($)
C0	C1	C2
3,700	5,300	10,900

a. The internal rate of return is 14.36%. If the opportunity cost of capital is 14%, what is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

NPV $

b. Would you accept the offer?

	Yes
	No