A firm is considering two projects with the following cash flows. The required return for both projects is 18 percent.

Year

Project J

Year

Project K

0

-$850,000

0

-$575,000

1

300,000

1

250,000

2

450,000

2

275,000

3

500,000

3

405,000

Required:

a. Calculate the NPV & IRR for both projects.

b. Calculate the payback periods (including the fraction of a year) for both projects.

c. Calculate the profitability index of both projects.

d. Based on the above calculations, which project or projects should the firm choose if the projects are:

Independent. Explain

Mutually exclusive. Explain