X- Cell Limited is in the process of evaluating a project which will allow the firm to branch into a new product line. The projected cash flow for its new product line is as follows:

Year	Cash flows
0	(153,000)
1	78,000
2	67,000
3	49,000

1. Calculate the payback period for the project. What is the key drawback of the payback method of project appraisal?
2. If the required return is 11 percent, should the firm accept the project based on the IRR rule?
3. Suppose X-Cell uses the NPV decision rule. At a required return of 9 percent, should the firm accept the project? Will your decision change if the required was 15 percent and why?
4. Why is NPV considered to be a superior method of evaluating the cash flows from a project? Suppose the NPV for a periods cash flows is computed to be $2500.00. What does this number represent to the firms shareholders?