Question: Here are the expected cash flows for three projects: Project Cash Flows (dollars) Year 0 Year 1 Year 2 Year 3 Year 4 A 5,200

Here are the expected cash flows for three projects:

Project Cash Flows (dollars)
Year 0 Year 1 Year 2 Year 3 Year 4
A 5,200 +1,050 +1,050 +3,100 0
B 1,200 0 +1,200 +2,100 +3,100
C 5,200 +1,050 +1,050 +3,100 +5,100

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

b. If you use the payback rule with a cutoff period of 2 years, which projects will you accept?

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

d-1. If the opportunity cost of capital is 9%, calculate the NPV for projects A, B, and C.

Note: 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?

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

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