ABC Ltd is deciding between two projects with the following details:

Project Red

• Initial Investment: $4,000,000
• Cash Flows:
  • Year 1: $1,500,000
  • Year 2: $1,300,000
  • Year 3: $1,200,000
  • Year 4: $900,000

Project Blue

• Initial Investment: $3,800,000
• Cash Flows:
  • Year 1: $1,400,000
  • Year 2: $1,200,000
  • Year 3: $1,000,000
  • Year 4: $1,200,000

a. Calculate the NPV of both projects using a 9% discount rate. b. Find the IRR for each project. c. Determine which project has the shortest payback period. d. Recommend which project should be undertaken and justify your choice.