Consider the following projects, K and L. Project K costs $2,500 and generates cash flows of $1,000, $1,200, and $1,500 over the next 3 years. Project L costs $2,000 and generates cash flows of $800, $1,000, and $1,200 for the next 3 years.

1. Compute the NPV for each project using a 7% discount rate.
2. Identify the IRR for both projects.
3. Explain which project should be chosen based on NPV and IRR criteria.

Calculate the profitability index for each project and discuss its implications.