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1.) Consider the following information:

CASH FLOW ($) TABLE

PROJECT	C0	C1	C2	C3	C4
A	-6,400	2,400	2,400	1,600	0
B	-1,700	0	1,000	3,400	4,400
C	-3,600	2,400	1,000	1,900	1,400

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

PROJECT	PAYBACK PERIOD
A	_____YEARS
B	_____YEARS
C	______YEARS

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

• Project A and Project B

• Project C

• Project B

• Project A, Project B, and Project C

• Project B and Project C

• Project A

• None

• Project A and Project C

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

multiple choice 2

• Project B and Project C

• Project A

• Project B

• Project C

• Project A, Project B, and Project C

• Project A and Project C

• Project A and Project B

d. If the opportunity cost of capital is 10%, which projects have positive NPVs?

multiple choice 3

• Project C

• Project A and Project B

• Project A

• Project B

• Project A and Project C

• Project A, Project B, and Project C

• Project B and Project C

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

multiple choice 4

• True

• False

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

multiple choice 5

• Yes

• No

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

multiple choice 6

• Yes

• No