Consider the following information:

	Cash Flows, $
Project	C0	C1	C2	C3	C4
A	6,900	+2,100	+2,100	+3,100	0
B	2,200	0	+1,000	+3,900	+4,900
C	6,500	+3,500	+3,500	+4,900	+6,900

a.	What is the payback period on each of the above projects? (Round your answers to 2 decimal places.)

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

b.

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

	Project B and Project C
	Project A and Project C
	Project A and Project B
	Project B
	Project C
	Project A, Project B and Project C
	Project A

c.

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

	Project A, Project B and Project C
	Project A and Project C
	Project A
	Project C
	Project A and Project B
	Project B and Project C
	Project B

d.

If the opportunity cost of capital is 8%, which projects have positive NPVs?

	Project A, Project B and Project C
	Project B and Project C
	Project C
	Project A and Project C
	Project A
	Project B
	Project A and Project B

e.

If a firm uses a single cutoff period for all projects, it is likely to accept too many short-lived projects. True or false?

	True
	False

f-1.

If the firm uses the discounted-payback rule, will it accept any negative-NPV projects?

	Yes
	No

f-2.

Will it turn down positive-NPV projects?

	Yes
	No