Question: Two projects have been presented to the board: Year Project G Project H 0 -$50,000 -$50,000 1 $10,000 $0 2 $10,000 $0 3 $10,000 $0

Two projects have been presented to the board:

Year

Project G

Project H

0

-$50,000

-$50,000

1

$10,000

$0

2

$10,000

$0

3

$10,000

$0

4

$10,000

$0

5

$10,000

$75,000

Requirements:

  1. Compute the NPV with a discount rate of 6%.
  2. Calculate the IRR for both projects.
  3. Find the Profitability Index for each project.
  4. Identify which project is more favorable and provide reasons.

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