FIN325 HM#5

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

c.
If you use a cutoff period of three years, which projects would you accept?
 
 
 
Project A, Project B and Project C 
 

d.
If the opportunity cost of capital is 11%, which projects have positive NPVs?
 
 I used a financial calculator
 
Project B and Project C 
 

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 
 

f-1.
If the firm uses the discounted-payback rule, will it accept any negative-NPV projects?
 
 
 
No 
 

f-2.
Will it turn down positive-NPV projects?
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