Project Financial Analysis (in €):

• Project X:

• Initial Cost: €12,000
• Year 1: €4,000
• Year 2: €5,000
• Year 3: €6,000
• Year 4: €7,000

• Project Y:

• Initial Cost: €10,000
• Year 1: €3,000
• Year 2: €4,500
• Year 3: €5,500
• Year 4: €6,500

Required:

1. Calculate the payback period for each project.
2. Which project would you choose if the standard payback period is 3 years?
3. Compute the discounted payback period at a discount rate of 8%.
4. Determine the NPV for each project using a discount rate of 8%.
5. Compute the profitability index (PI) for both projects.