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The following problem is common in the automobile industry. You are required to assess the viability of two new car lines. Your company cannot afford

The following problem is common in the automobile industry. You are required to assess the viability of two new car lines. Your company cannot afford to undertake both projects and must choose one only. The appropriate discount rate is 12% for this investment.

Year

People carrier ()

SUV ()

0

-200000

-500000

1

300000

300000

2

100000

250000

3

100000

250000

a. Based on payback period, which project should be taken?

b. Based on the NPV, which project should be taken?

c. Based on IRR, which project should be taken?

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