3. Connor Corporation is considering two projects (see below). For your analysis, assume these projects are mutually exclusive with a required rate of return of 12%.

	Project 1	Project 2
Initial investment	$(465,000)	$(700,000)
Cash inflow Year 1	$510,000	$850,000

Compute the following for each project, showing all your work:

• NPV (net present value)
• PI (profitability index)
• IRR (internal rate of return)

Now, based on your analysis, answer the following questions :

a. Which project should be selected and why?

b. If the projects had the same IRR amounts but different NPV totals, then how would you know which project to select? Explain.

c. Suppose both projects had negative NPV totals, which project would you choose?

d. What do negative NPVs indicate? Explain.

e. Should the payback method be used to assist in project selection? Why or why not? Explain.