W98FINAL.4

4. Give an example of the cashflows for a positive NPV project that a firm using a 2-year payback rule would reject. (3 pts)
Project A in question 1 is such a project. In order to get full credit for this answer, you had to have a project that was positive NPV--that means that if you did not provide a discount rate, you did not get full credit. Without knowing the discount rate, one cannot know if the project is positive NPV.

Back to Practice Problems