TF 1. A project with a payback period of four years is preferable to a project with a payback period of three years. TF 2. The NPV ignores cash flows that occur late in the life of the project. TF 3. The payback period method allows the financial analyst to account for all the cash flows of the project TF 4. The time disparity problem may arise when two projects are mutually exclusive and one project has relatively larger cash flows early and the other project has relatively large cash flows later TF S. New product projects are less risky than replacement (without increased sales) projects. TF 6. Capital budgeting is the process of evaluating short-term investment decisions. TF 7. A size disparity problem occurs when two projects are the same size. TF 8. The internal rate of return is the discount rate that makes the NPV equal to zero. TF 9. A capital rationing problem occurs when a company does not have enough money to buy all of the acceptable projects available. TF 10. The profitability index is the present value of cash flows divided by the project cost