You Can Do It Co$.$ is considering three mutually exclusive projects, Project A$,$ Project B and Project C$.$ The company is interested in a project that will repay the initial investment within $5$ years. each with a useful life of $5$ years. The company has started the analysis of the projects and the results for Project A and Project B are shown in the table below.

Project A

Project B

Project C

Payback $($years$)$

$3\mathrm{.}1$

$4\mathrm{.}3$

Discounted payback $($years$)$

$4\mathrm{.}2$

$5\mathrm{.}7$

Net Present Value

$$187,951$

$$294,672$

Profitability Index

$1\mathrm{.}25$

$1\mathrm{.}29$

The cash flows for Project C are as follows:

Year

Cash flows

$0$

$($$$1,000,000)$

$1$

$$250,000$

$2$

$$285,000$

$3$

$$355,000$

$4$

$$410,000$

$5$

$$500,000$

The cost of capital for the company is $12\%.$

Required: Use the information provided for Project C to assess its feasibility.

a$.$ Compute the following for Project C$,$

$($i$)$ Payback period $[4$ marks$]$

$($ii$)$ Discounted payback period$[7$ marks$]$

$($iii$)$ Net present value$[4$ marks$]$

$($iv$)$ Profitability index$[3$ marks$]$

b$.$ State which of the three projects should be chosen, and why?$[2$ marks$]$

Total