Comparing Investment Criteria You are a senior manager at Airbus and have been authorized to spend up to €200,000 for projects. The three projects you are considering have the following characteristics:

Project A: Initial investment of €150,000. Cash flow of €50,000 at year 1 and €100,000 at year 2. This is a plant expansion project, where the required rate of return is 10 per cent.

Project B: Initial investment of €200,000. Cash flow of €200,000 at year 1 and €111,000 at year 2. This is a new product development project, where the required rate of return is 20 per cent.

Project C: Initial investment of €100,000. Cash flow of €100,000 at year 1 and €100,000 at year 2. This is a market expansion project, where the required rate of return is 20 per cent.

Assume the corporate discount rate is 10 per cent.

Please offer your recommendations, backed by your analysis:

A B C Implications Payback period IRR Incremental IRR PI NPV