A company has $275,000 to invest in either Project C1 or Project D1. The cash flows are as follows:

• Year 1:
  • Project C1: $75,000
  • Project D1: $30,000
• Year 2:
  • Project C1: $75,000
  • Project D1: $60,000
• Year 3:
  • Project C1: $75,000
  • Project D1: $100,000
• Year 4:
  • Project C1: $75,000
  • Project D1: $160,000
• Year 5:
  • Project C1: $75,000
  • Project D1: $90,000

The discount rate is 10%.

Required:

1. For each project, calculate the:
   • Simple payback period
   • Discounted payback period
   • Net present value
2. Prepare a pro forma income statement for the selected project for the next five years.
3. Advise the company on which project to select based on the results of your calculations.