4) If the opportunity cost of capital is 10%, which projects have positive NPVs? 5) If a firm uses a single cutoff period for all projects, it is likely to accept too many short-lived projects.” True or false? 6)If the firm uses the discounted-payback rule, will it accept any negative-NPV projects? Will it turn down any positive NPV projects?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Please answer the following questions in detail, provide examples whenever applicable, provide in-text citations.

(TABLE IMAGE ATTACHED)

4) If the opportunity cost of capital is 10%, which projects have positive NPVs?

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

6)If the firm uses the discounted-payback rule, will it accept any negative-NPV projects? Will it turn down any positive NPV projects?

Cash Flows ($)
Project
Co
C2
C3
C4
A
-5,000
+1,000
+1,000
+3,000
B
-1,000
+1,000
+2,000
+3,000
-5,000
+1,000
+1,000
+3,000
+5,000
Transcribed Image Text:Cash Flows ($) Project Co C2 C3 C4 A -5,000 +1,000 +1,000 +3,000 B -1,000 +1,000 +2,000 +3,000 -5,000 +1,000 +1,000 +3,000 +5,000
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