Consider the investment options in Project K and Project L with the following cash flows:
YearProject KProject L
1$40,000$20,000
2$40,000$50,000
3$40,000$100,000
4$40,000$150,000
5$40,000$60,000
The firm’s discount rate is 9%.
Required: a. Calculate the following for each project:
•Simple payback period
•Discounted payback period
•Net present value
•Internal rate of return
•Profitability index
b. Provide a recommendation based on the computed values.