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Compute internal rate of return and profitability index

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Farrah Corporation is considering two projects (see below). For your analysis, assume these projects are mutually exclusive with a required rate of return of 12%.

                                         Project 1                    Project 2

Initial investment             $185,000            $1,100,000

Cash inflow Year 1            $230,000                $1,450,000

Question 1: Compute the following for each project (show your work):

NPV (net present value)
PI (profitability index)
IRR (internal rate of return)

Question 2: Which project should be selected? Why?

Reference no: EM132565689

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