Epsilon Corporation is evaluating the following projects, Project G and Project H.

Project G

• Year 0: -$90,000
• Year 1: $20,000
• Year 2: $30,000
• Year 3: $40,000
• Year 4: $50,000

Project H

• Year 0: -$100,000
• Year 1: $25,000
• Year 2: $35,000
• Year 3: $45,000
• Year 4: $55,000

The discount rate for Project G is 9%, and for Project H is 10%.

Requirements:

1. Calculate the payback period for each project.
2. Determine which project meets a payback requirement of 3 years.
3. Calculate the profitability index for each project.
4. Recommend which project to accept based on the profitability index.
5. Compute the net present value (NPV) and recommend the project based on NPV.