Question: A company is considering two mutually exclusive projects, M and N. Project M requires an investment of $3,000 and has annual cash flows of $1,200

A company is considering two mutually exclusive projects, M and N. Project M requires an investment of $3,000 and has annual cash flows of $1,200 for 4 years. Project N costs $2,500 and provides cash flows of $1,000, $1,200, $1,300, and $1,400 over 4 years.

  1. Calculate the NPV of each project with a discount rate of 6%.
  2. Determine the IRR for both projects.
  3. Compare the payback periods of the two projects.
  4. Decide which project is preferable based on the profitability index.

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