JK Products Pty Ltd is considering investing in either of two competing projects that will allow the company to eliminate a production bottleneck and meet the growing demand for its products. The companys engineering department narrowed the alternatives down to two Status Quo (SQ) and High Tech (HT). Working with the accounting and finance personnel, the companys CFO developed the following estimates of the cash flows for SQ and HT over the relevant 6-year time horizon. The firm has an 11 per cent required return and views these projects as equally risky.

	Project SQ	Project HT
Year	Cash Flows
0	$670,000	$940,000
1	250,000	170,000
2	200,000	180,000
3	170,000	200,000
4	150,000	250,000
5	130,000	300,000
6	130,000	550,000

Calculate the payback period for each project

Calculate the net present value (NPV) of each project, assess its acceptability, and indicate which project is best using NPV.

Calculate the profitability index (PI) of each project, assess its acceptability, and indicate which project is best using PI.

Which of the two mutually exclusive projects would you recommend JK Products undertake? Why?