Mutually Exclusive Projects

Suppose you are the CEO of an automobile manufacturer that is considering investing in one of two production lines: Line A and Line B$.$ Installing Line A would cost $$300,000$ today. Once installed, Line A would build cars that run on hydrogen fuels, bringing a benefit of $$90,000$ per year from year $1$ to year $5.$ In contrast, installing Line B would cost $$50,000$ today. Line B would make gasoline cars, 'and it would bring a benefit of $$20,000$ per year from year $1$ to year $5.$

$($a$)$ Find the NPV of each project, when the appropriate discount rate is $10\%.$

$($b$)$ Based on the NPV found in $($a$),$ which project$($s$)$ should you take if there are no constraints?

$($c$)$ Now suppose that your company has limited land to use, so you may install only one of the two lines. Considering the constraint, which project should you take?n