Delta Enterprises is evaluating two potential projects: Project M and Project N.
Project M Cash Flow ($):
•Year 0: -$70,000
•Year 1: $10,000
•Year 2: $20,000
•Year 3: $30,000
•Year 4: $50,000
Project N Cash Flow ($):
•Year 0: -$90,000
•Year 1: $20,000
•Year 2: $30,000
•Year 3: $40,000
•Year 4: $60,000
The discount rate for Project M is 8%, and for Project N, it is 10%.
1.Calculate the payback period for each project.
2.Determine which project should be accepted if the required payback period is 3 years.
3.Calculate the profitability index for both projects.
4.Which project should be accepted based on the profitability index?
5.Calculate the NPV for each project and determine which project should be accepted.