Here are the expected cash flows for three projects:

a. What is the payback period on each of the projects?
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, which projects would you accept?
d. If the opportunity cost of capital is 10%, which projects have positive NPVs?
e. "Payback gives too much weight to cash flows that occur after the cutoff date." True or false?

Cash Flows (dollars) Project Year: 2 3 4 5,000 +1,000 +1,000 +3,000 1,000 0 +1,000 +2,000 +3,000 -5,000 +1,000 +1,000 +3,000 +5,000