MBATech, Inc., is negotiating with the mayor of Bean City to start a manufacturing plant in an abandoned building.

The cash flows for MBAT's proposed plant are:

Year 0: - 1,000,000 Year 1: 371,739 Year 2: 371,739 Year 3 371,739 Year 4: 371,739

The city will subsidize MBAT. The timing and the form of the subsidy have not been determined depending on which investment criterion is used by the company. In preliminary discussions, the company suggested 4 alternatives.

1.) Subsidize the project to bring its IRR to 25%

2.) Subsidize the project to provide a two-year payback.

3.) Subsidize the project to provie an NPV of $75,000 when cash flows are discounted at 20%

4.) Subsidize the project to provide an account rate of return of 40%

Defined By: ARR=(Average Annual Cash Flow- [Investment/ # of years])/ (Investment/2)

Whats the best subsidy for each year under each alternative suggested by MBAT? Which of these plans be the best if the appropriate discount rate is 20%? Explain in words!