Project Selection Project Rho:

• Initial Investment: $200,000
• Cash Flows:
  • Year 1: $50,000
  • Year 2: $60,000
  • Year 3: $70,000
  • Year 4: $80,000

Project Sigma:

• Initial Investment: $220,000
• Cash Flows:
  • Year 1: $45,000
  • Year 2: $55,000
  • Year 3: $65,000
  • Year 4: $75,000

Requirements:

1. Calculate the NPV for each project using a discount rate of 12%.
2. Determine the IRR for each project.
3. Calculate the Payback Period and Discounted Payback Period for each project.
4. Compute the Profitability Index (PI) for each project.
5. Recommend which project to undertake assuming they are mutually exclusive.