A firm has two potential projects, M and N, with the following projected cash flows:
•Project M: Year 1: $90,000, Year 2: $90,000, Year 3: $90,000, Year 4: $90,000, Year 5: $90,000
•Project N: Year 1: $25,000, Year 2: $55,000, Year 3: $95,000, Year 4: $125,000, Year 5: $35,000
The discount rate is 13%.
Required:
1.For each project, calculate:
oSimple payback period
oDiscounted payback period
oNet present value
oInternal rate of return
oProfitability index
2.Advise on which project to invest in.