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%.

Initiall investments

Project 1. (684,000)

Project 2 (585,000)

Cash inflow Year 1

Project 1 $275,000

Project 2 $380,000

Compute the following for each project:

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

Based on your analysis, answer the following questions:

• Which is the best choice? Why?
• Which project should be selected and why? If the projects had the same IRR amounts but different NPV totals, then how would you know which project to select? Explain.
• What would happen if both projects had negative NPV totals? Which project would you choose? What do negative NPVs indicate? Explain.
• Should we also use the payback method to assist us in project selection? Why or why not? Explain.