Question 3

JDH Investments Limited is considering the following two tourism investment options, both with a 10% required rate of return and a five-year lifespan.

	PROJECTS CASH FLOWS
YEAR	P	Q
0	(60,000)	(60,000)
1	20,000	50,000
2	30,000	20,000
3	40,000	5,000
4	50,000	5,000
5	60,000	5,000

1. Calculate the:
   1. the payback period for both projects.
   2. Net Present Value.
   3. Profitability Index

2. Using the information calculated at A. which project should be selected, assuming that the projects are:

1. 1. mutually exclusive
   2. independent
   3. Justify your response.