Which of the following statements is CORRECT?
| | a. The regular payback does not consider cash flows beyond the payback year, but the discounted payback overcomes this defect. | | |
| | b. The regular payback method recognizes all cash flows over a project's life. | | |
| | c. The regular payback method was, years ago, widely used, but virtually no companies even calculate the payback today. | | |
| | d. The discounted payback method recognizes all cash flows over a project's life, and it also adjusts these cash flows to account for the time value of money. | | |
| | e. The regular payback is useful as an indicator of a project's liquidity because it gives managers an idea of how long it will take to recover the funds invested in a project. | |
Harry's Inc. is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that if a project's projected NPV is negative, it should be rejected.
| WACC: | 7.50% | | | | | |
| Year | 0 | 1 | 2 | 3 | 4 | 5 |
| Cash flows | -$1,000 | $310 | $310 | $310 | $310 | $310 |
