Investment Decision

ABC Ltd. is considering two projects:

Project X:

• Initial Outlay: $50,000
• Cash flows: $20,000 annually for 4 years

Project Y:

• Initial Outlay: $50,000
• Cash flows: $15,000 annually for 5 years

The discount rate is 9%.

Requirements:

1. Calculate the NPV of both projects.
2. Compute the IRR for both projects.
3. Perform a break-even analysis for Project X.
4. Determine which project has a higher profitability index.