1. Consider the following information:

	Cash Flows ($)
Project	C0	C1	C2	C3	C4
A	5,000	1,000	1,000	3,000	0
B	1,000	0	1,000	2,000	3,000
C	5,000	1,000	1,000	3,000	5,000

a.What is the payback period on each of the above projects?

b.Given that you wish to use the payback rule with a cutoff period of two years, which projects would you accept?

Project A and Project B

Project A, Project B, and Project C

Project B

Project B and Project C

Project C

Project A

Project A and Project C

c.If you use a cutoff period of three years, which projects would you accept?

Project A and Project B

Project C

Project A

Project A and Project C

Project A, Project B, and Project C

Project B and Project C

Project B

d.If the opportunity cost of capital is 10%, which projects have positive NPVs?

Project A and Project B

Project A

Project A, Project B, and Project C

Project A and Project C

Project C

Project B and Project C

Project B

2.

You have the chance to participate in a project that produces the following cash flows:

Cash Flows ($)
C0	C1	C2
5,000	4,000	11,000

a.The internal rate of return is 13.6%. If the opportunity cost of capital is 10%, what is the NPV of the project?(A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

3.

Consider the following projects:

Cash Flows ($)
Project	C0	C1	C2	C3	C4	C5
A	-1,000	1,000	0	0	0	0
B	-2,000	1,000	1,000	4,000	1,000	1,000
C	-3,000	1,000	1,000	0	1,000	1,000

a.If the opportunity cost of capital is 10%, which project(s) have a positive NPV?

Positive NPV project(s)

Project A

Project B

Project C

Projects A and B

Projects A and C

Projects B and C

Projects A, B, and C

No project

b.Calculate the payback period for each project:(Round your answers to the nearest whole number. If a project never pays back, enter "0".)

Project A	year(s)
Project B	year(s)
Project C	year(s)

c.Which project(s) would a firm using the payback rule accept if the cutoff period were three years?

Project(s) accepted

d.Calculate the discounted payback for each project.(Do not round intermediate calculations. Round your answers to 2 decimal places. If a project never pays back, enter "0".)

Project A	year(s)
Project B	year(s)
Project C	year(s)

e.Which project(s) would a firm using the discounted payback rule accept if the cutoff period were three years?

Project(s) accepted