A company is considering investing $280,000 in either Project S or Project T. The following cash flows are projected:

Project S:

•Year 1: $100,000

•Year 2: $100,000

•Year 3: $100,000

•Year 4: $100,000

•Year 5: $100,000

Project T:

•Year 1: $40,000

•Year 2: $60,000

•Year 3: $120,000

•Year 4: $180,000

•Year 5: $100,000

The discount rate is 12%.

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.

b) Based on your analysis, advise the company on which project to invest in.