Consider the following investment opportunities for JKL Corp.: Project V and Project X.

• Project V
  • Cost of Capital: 8%
  • Initial Investment: $160,000
  • Cash Inflow Year 1: $50,000
  • Cash Inflow Year 2: $60,000
  • Cash Inflow Year 3: $80,000
  • Scrap Value at Year 3: $7,000
• Project X
  • Cost of Capital: 10%
  • Initial Investment: $200,000
  • Cash Inflow Year 1: $60,000
  • Cash Inflow Year 2: $70,000
  • Cash Inflow Year 3: $90,000
  • Scrap Value at Year 3: $5,000

Tasks:

1. Determine the payback period for each project.
2. Calculate the NPV for each project.
3. Calculate the IRR for each project.
4. Evaluate the profitability index for each project.
5. Recommend which project should be chosen.