The cash fl ows associated with three different projects are as follows: Cash Flows Alpha ($ in millions) Beta ($ in millions) Gamma ($ in millions) Initial Outfl ow –1.5 –0.4 –7.5 Year XXXXXXXXXXYear...

The cash fl ows associated with three different projects are as follows: Cash Flows Alpha ($ in millions) Beta ($ in millions) Gamma ($ in millions) Initial Outfl ow –1.5 –0.4 –7.5 Year 1 0.3 0.1 2.0 Year 2 0.5 0.2 3.0 Year 3 0.5 0.2 2.0 Year 4 0.4 0.1 1.5 Year 5 0.3 –0.2 5.5 a. Calculate the payback period of each investment. b. Which investments does the fi rm accept if the cutoff payback period is three years? Four years? c. If the fi rm invests by choosing projects with the shortest payback period, which project would it invest in? d. If the fi rm uses discounted payback with a 15 percent discount rate and a four-year cutoff period, which projects will it accept? e. One of these almost certainly should be rejected, but may be accepted if the fi rm uses payback analysis. Which one? f. One of these projects almost certainly should be accepted (unless the fi rm’s opportunity cost of capital is very high), but may be rejected if the fi rm uses payback analysis. Which one?