question 25 and 26

payback periods of less than 5 years. What is this project's Ilva? Will it be accepted? b. Should this project be pursued if the discount rate discount rate is 12%? Will the firm's decision change as the discount 25. Payback and NPV. A project has a life of 10 years and a payback must be true of project NPV? (LO8-4) 26. Payback and NPV. Here are the expected cash flows for three projects: if the discount rate is 2%? (What is its NPV?) What if the decision change as the discount rate changes? years and a payback period of 10 years. What Cash Flows (dollars) Project Year: 0 1 2 3 4 -5,000 +1,000 +1,000 +3,000 -1,000 0 +1,000 +2,000 +3,000 -5,000 +1,000 +1,000 +3,000 +5,000 a. What is the payback period on each of the projects? b. Given that you wish to use the payback rule with a cutoff period of 2 years, which projects would you accept? c. If you use a cutoff period of 3 years, which projects would you accept? d. If the opportunity cost of capital is 10%, which projects have positive NPVs? e. "Payback gives too much weight to cash flows that occur after the cutoff date." True or false? Mutually Exclusive Investments. Here are the cash-flow forecasts for two mutually exclusive projects: (L08-5) Cash Flows (dollars)