Louis Sports is evaluating two mutually exclusive projects with the following estimated cash flows. Assume 10% cost of capital.

Years Option 1 Option2

0 $(100,000) $(100,000)

1 $36,000.................._________

2 $36,000.................._________

3 $36,000.................._________

4 $36,000................._________

5 $36,000..................$200,000

a.) What is the NPV and IRR of the two projects? Which option has the best NPV? Best IRR?

b.) What is the payback period of each option?

c.) What is the profitability index for each option?

d.) At approximately what discount rate would you be indifferent between the two projects?