Question: Here are the expected cash flows for three projects: Project Year 0 1 2 3 4 A -5,400 +1,100 +1,100 +3,200 0 B -1,400 0

Here are the expected cash flows for three projects:

Project Year 0 1 2 3 4

A -5,400 +1,100 +1,100 +3,200 0

B -1,400 0 +1,400 +2,200 +3,200

C -5,400 +1,100 +1,100 +3,200 +5,200

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?

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

D-1. If the opportunity cost of capital is 10%, calculate the NPV for projects A, B , and C.

D-2. Which projects have positive NPVs?

E. Payback gives too much weight to cash flows that occur after the cutoff date. True of False?

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