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Theta Corporation is evaluating two investment opportunities. Project K needs an initial investment of $33,000 with the following cash flows: Year 1: $9,000 Year 2:

Theta Corporation is evaluating two investment opportunities. Project K needs an initial investment of $33,000 with the following cash flows:

  • Year 1: $9,000
  • Year 2: $11,000
  • Year 3: $13,000

Project L requires an initial outlay of $53,000 with the following cash flows:

  • Year 1: $15,000
  • Year 2: $18,000
  • Year 3: $20,000
Requirements:
  1. Compute the NPV for each project at a discount rate of 13%.
  2. Calculate the IRR for each project.
  3. Determine the Profitability Index (PI) for each project.
  4. Analyze which project should be selected based on the calculated financial metrics.

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