The management of DEF Corp. is evaluating two potential investments. Details are as follows:

• Investment 1:
  • Initial Cost: $750,000
  • Life: 5 years
  • Annual Net Cash Inflow: $200,000
• Investment 2:
  • Initial Cost: $1,200,000
  • Life: 6 years
  • Annual Net Cash Inflow: $280,000

Requirements:

1. Calculate the discounted payback period for both investments using a discount rate of 7%.
2. Determine the NPV for both investments.
3. Calculate the IRR for both investments.
4. Recommend which investment should be made.