1. The _________________ method allows you to check how long the proposed investment takes to pay back your initial investment.

2. Two or more projects are ________________________ if management can accept one, the other, or neither, but not both, projects.

3. Suppose your firm is considering investing in a project with the cash flows shown as follows, and that the required rate of return on projects of this risk class is 7 percent.

Time 0 1 2 3 4 5 6

Cash flow -125,000 75,000 105,000 105,000 78,000 55,000 25,000

Use the NPV decision rule to evaluate this project; should it be accepted or rejected? Show your calculations for the NPV.