A major manufacturing company is considering the development of an entirely new electric vehicle. The engineers recommend two mutually exclusive models: The E1 model and the E2 model. The investment outlay for the E1 model has been computed to be $480,000, and the outlay for the E2 model has been computed to be $400,000. This initial outlay is depreciated on a straight line basis over a 20-yr period (no salvage value). The firms cost of capital is 14%.

The engineering group has estimated that the annual operating costs would be $480,000 for E1 and $250,000 for E2. Furthermore, it is estimated that the incremental annual sales would be $800,000 for E1 and $500,000 for E2. These figures are expected to remain constant over the next 20 years and are already adjusted for inflation. The corporate tax rate is 50%.

Your management team must make a recommendation to senior management about which model should be adopted.

Q.1: Which model do you recommend (E1 or E2)? Make sure to justify your choice by including an analysis of the relevant decision criteria, including NPV, IRR, MIRR, and PP.

Please show work!!