Farrah Corporation is considering two projects (see below). For your analysis, assume these projects are mutually exclusive with a required rate of return of 12%.

Project 1

Initial investment

$185,000

Cash inflow Year 1

$230,000

Project 2

Initial Inv

$1,100,000

Cash Inflow year 1

$1,450,000

Compute the following for each project:

NPV (net present value)

PI (profitability index)

IRR (internal rate of return)

Which project should be selected? Why?