Question 1: What are the three potential flaws with the regular payback method? Does the discounted payback method correct all three flaws? Explain.
Question 2: Why is the NPV of a relatively long-term project (one for which a high percentage of its cash flows occurs in the distant future) more sensitive to changes in WACC than that of a short-term project?
Question 3: What is a mutually exclusive project? How should managers rank mutually exclusive projects?