Analyze the investment options for DEF Inc.: Project W and Project Y.

• Project W
  • Cost of Capital: 10%
  • Initial Investment: $180,000
  • Cash Inflow Year 1: $60,000
  • Cash Inflow Year 2: $70,000
  • Cash Inflow Year 3: $90,000
  • Scrap Value at Year 3: $8,000
• Project Y
  • Cost of Capital: 12%
  • Initial Investment: $220,000
  • Cash Inflow Year 1: $70,000
  • Cash Inflow Year 2: $80,000
  • Cash Inflow Year 3: $100,000
  • Scrap Value at Year 3: $6,000

Tasks:

1. Calculate the payback period for each project.
2. Determine the NPV for each project.
3. Calculate the IRR for each project.
4. Compare the profitability index for each project.
5. Make a recommendation on which project to select.