GCC uses the following criteria to make capital investment decisions:

Effect on earnings per share (must be positive)

Payback period (must be less than six years)

Internal rate of return (must be less than 12 percent)

Net present value (must be positive at a 12 percent discount rate)

1.1. What are the advantages and disadvantages of each of these measures? (5)

1.2. Why do you think GCC uses all of these measures rather than just one of them? (5)