A restaurant chain is considering two renovation projects. Here are the details:

• Renovation Project 1:

• Initial Cost: $250,000
• Cost of Capital: 10%
• Increased Cash Flows: Year 1: $70,000, Year 2: $75,000, Year 3: $80,000, Year 4: $85,000, Year 5: $90,000

• Renovation Project 2:

• Initial Cost: $300,000
• Cost of Capital: 12%
• Increased Cash Flows: Year 1: $80,000, Year 2: $85,000, Year 3: $90,000, Year 4: $95,000, Year 5: $100,000

Requirements:

1. Determine the payback period for each project.
2. Calculate the NPV for each project.
3. Compute the IRR for each project.
4. Recommend which renovation project to proceed with and justify your choice.