A business is evaluating the feasibility of two projects, O and P, each with an investment of $230,000. The cash flows for each project are as follows:

Project O:

•Year 1: $70,000

•Year 2: $70,000

•Year 3: $70,000

•Year 4: $70,000

•Year 5: $70,000

Project P:

•Year 1: $25,000

•Year 2: $45,000

•Year 3: $95,000

•Year 4: $145,000

•Year 5: $75,000

The cost of capital is 13%.

Required:

1.Calculate the payback period for both projects.

2.Compute the discounted payback period for both projects.

3.Determine the net present value for both projects.

4.Calculate the internal rate of return for both projects.

5.Assess the profitability index for both projects.

c) Based on your analysis, suggest which project the business should invest in.