An investment firm is considering two projects to diversify its portfolio:
Project X:
•Initial Investment: $4,500,000
•Yearly Returns: $1,200,000 for 6 years
Project Y:
•Initial Investment: $3,500,000
•Yearly Returns: $1,000,000 for 6 years
Requirements:
1.Compute the NPV for both projects at a discount rate of 7%.
2.Calculate the IRR for each project.
3.Evaluate the payback period for both projects.
4.Recommend the better project based on NPV, IRR, and payback period.