Question: Here are the expected cash flows for three projects: Cash Flows (dollars) Project Year: 0 1 2 3 4 A 5,500 + 1,125 + 1,125

Here are the expected cash flows for three projects:

	Cash Flows (dollars)
Project	Year:	0		1		2		3		4
A			5,500	+	1,125	+	1,125	+	3,250		0
B			1,500		0	+	1,500	+	2,250	+	3,250
C			5,500	+	1,125	+	1,125	+	3,250	+	5,250

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

b. If you use a cutoff period of 2 years, which projects would you accept?

Project A

Project B

Project C

Project A and Project B

Project B and Project C

Project A and Project C

Projects A, B, and C

None

c. If you use a cutoff period of 3 years, which projects would you accept?

Project A

Project B

Project C

Project A and Project B

Project B and Project C

Project A and Project C

Projects A, B, and C

None

d-1. If the opportunity cost of capital is 11%, calculate the NPV for projects A, B, and C. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)

d-2. Which projects have positive NPVs?

Project A

Project B

Project C

Project A and Project B

Project B and Project C

Project A and Project C

Projects A, B, and C

None

e. "Payback gives too much weight to cash flows that occur after the cutoff date." True or false?

True

False

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