Iota Corp is analyzing two investment projects, Project O and Project P.

Project O

• Year 0: -$95,000
• Year 1: $30,000
• Year 2: $40,000
• Year 3: $50,000
• Year 4: $60,000

Project P

• Year 0: -$105,000
• Year 1: $35,000
• Year 2: $45,000
• Year 3: $55,000
• Year 4: $65,000

The discount rate for Project O is 7%, and for Project P is 11%.

Requirements:

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