Consider two mutually exclusive projects with the following cash flows:

• Project K:
  • Initial Investment: -$2,000,000
  • Year 1: $500,000
  • Year 2: $700,000
  • Year 3: $900,000
  • Year 4: $1,200,000
• Project L:
  • Initial Investment: -$3,000,000
  • Year 1: $600,000
  • Year 2: $800,000
  • Year 3: $1,000,000
  • Year 4: $1,500,000

Requirements:

a. Calculate the NPV of each project using a discount rate of 5%. b. Determine the IRR for each project. c. Analyze which project has a better profitability index. d. Discuss which project should be chosen and why.