1) Ranking the projects simply by inspecting the cash flows is possible, but in order for us to find accurate and true measurement we shouldn't solely evaluate the company's cash flow. One of the reasons that we shouldn't solely use the cash flows is because the projects' cash flow are not all in the same time point; the dollar value today might not be the same in fifteen years later. Thus we need to have all of the cash flows in the same time period. Besides that, as stated in the table(Exhibit 1), Project 3 has the highest sum of cash flow benefits yet the payback is not accomplished until fifteen years later. Project 7, however, have the second lowest sum of cash flow benefits it's payback period starts during the second year.

2) There are a few criteria's that I might use to rank the projects such as the projects' payback period, its IRR, its average income, or its NPV. Also there different quantitative ranking methods that I would use, for example, Net Present Value, Payback Rule, Internal Rate of Return, and Average Accounting Return. Out of the four methods, NPV is going to result better because it is usually the best method for capital budgeting. IRR will only works when the projects have a series of cash flow, but we have a few project that have either one cash flow or no more than three cash flows. Payback period usually ignores the time value of money, as I stated in the first question, we need to have the value of money all on the same time period in order to get efficient rankings.

Methods | Ranking | Cash Flow | 3, 5, 8, 4, 1, 7, 6, 2, | NPV | 3, 4, 8, 7, 5, 1, 6, 2, | IRR | 6, 7, 8, 1, 4, 5, 2, 3 | Payback | 6, 7, 2, 8, 4, 1, 5, 3, | AAR | 7, 4, 8, 3, 5, 1, 6, 2, | 3)

The results are different from inspecting only the Cash Flow.

4) Project 1 could be a bond which investors will receive get coupon payments periodically at