(a) Compute the net present value of each project.

(b) Compute the profitability index of each project.

(c) Which project should be selected? Why?

Additional requirement:

Calculate the Cash Payback period of each project

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Grouper Company is considering two new projects, each requiring an equipment investment of $98,400. Each project will last for three years and produce the following cash flows: Year Cool Hot 1 $38,700 $42,700 2 43,700 42,700 3 48,700 42,700 131,100 $128,100 The equipment will have no salvage value at the end of its three-year life. Grouper Company uses straight-line depreciation and requires a minimum rate of return of 12%. Present value data are as follows: Present Value of 1 Period 12% 1 0.89286 2 0.79719 3 0.71178 Present Value of an Annuity of 1 Period 12% 1 0.89286 2 1.69005 3 2.40183