A firm is considering the following projects. Its opportunity cost of capital is 10%.

a. What are the payback period and discounted payback period on each project?
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 with the discounted payback rule, which projects would you accept?
d. Which projects have positive NPVs?
e. "Payback gives too much weight to cash flows that occur after the cutoff date." True or false?

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Cash Flows, s Time: 0 Project 2 3 +1,000 +3,000 -5,000 +1,000 B +3,000 +2,000 -1,000 +1,000 +3,000 +5,000 +1,000 -5,000 +1,000