ABC construction is considering two projects to develop. The estimated net cash flow from each project is as follows:

Project M Project N

Year 1 10,000 25,000

Year 2 15,000 25,000

Year 3 20,000 25,000

Year 4 25,000 25,000

Year 5 30,000 25,000

Each project requires an investment of $ 1, 00,000. A rate of 10% has been selected for the NPV analysis.

Require to

a) Calculate Payback period, ARR, Net Present Value and Profitability Index.

b) Which Project is to be recommended to develop based on NPV, Profitability Index, Payback period and ARR? Suggest