Question: A company is evaluating projects I and J, each needing an initial investment of $50,000. The cash inflows are as follows: Year Project I Project

A company is evaluating projects I and J, each needing an initial investment of $50,000. The cash inflows are as follows:

Year

Project I

Project J

1

$20,000

$15,000

2

$15,000

$20,000

3

$10,000

$25,000

4

$5,000

$10,000

Requirements:

  1. Determine the NPV of each project with a 12% discount rate.
  2. Calculate the IRR for each project.
  3. Compute the profitability index for each project.
  4. Discuss which project is better if the projects are mutually exclusive.

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