A company can invest $500,000 in either Project I or Project J. The expected cash flows are:
YearProject IProject J
1$150,000$30,000
2$150,000$60,000
3$150,000$120,000
4$150,000$180,000
5$150,000$40,000
The cost of capital is 11%.
Required:
1.Determine for each project:
oSimple payback period
oDiscounted payback period
oNet present value
oInternal rate of return
oProfitability index
2.Based on the results, suggest which project the company should invest in.