Profitability Analysis Project Kappa:

• Initial Investment: $45,000
• Cash Flows:
  • Year 1: $12,000
  • Year 2: $14,000
  • Year 3: $16,000
  • Year 4: $18,000

Project Lambda:

• Initial Investment: $55,000
• Cash Flows:
  • Year 1: $10,000
  • Year 2: $12,000
  • Year 3: $14,000
  • Year 4: $16,000

Requirements:

1. Calculate the NPV for each project with a discount rate of 7%.
2. Determine the IRR for each project.
3. Calculate the Payback Period and Discounted Payback Period for each project.
4. Assess the Profitability Index (PI) for each project.
5. Decide which project to invest in if they are mutually exclusive.