Which of the following statements is correct? Choose only one.

1.If a project results in a negative EBIT in certain years, it can create tax shields for the firm.

2. When working capital requirement increases, its effect on the projects cash flow is positive.

3. Payback rule is biased against short-term profits.

4. Using a modified internal rate of return (MIRR), one can resolve the problem associated with the difference in the scale of investments across projects.

5. None of the above.