Evaluate the following projects for GHI Ltd.: Project S and Project T.

• Project S
  • Cost of Capital: 9%
  • Initial Investment: $150,000
  • Cash Inflow Year 1: $40,000
  • Cash Inflow Year 2: $50,000
  • Cash Inflow Year 3: $70,000
  • Scrap Value at Year 3: $6,000
• Project T
  • Cost of Capital: 11%
  • Initial Investment: $180,000
  • Cash Inflow Year 1: $50,000
  • Cash Inflow Year 2: $60,000
  • Cash Inflow Year 3: $80,000
  • Scrap Value at Year 3: $5,000

Tasks:

1. Compute the payback period for each project.
2. Calculate the NPV for each project.
3. Calculate the IRR for each project.
4. Assess the profitability index for each project.
5. Provide a recommendation on which project to choose.