Question
You are a senior manager at Airbus and have been authorized to spend up to 200,000 for projects. The three projects you are considering have
You are a senior manager at Airbus and have been authorized to spend up to 200,000 for projects. The three projects you are considering have the following characteristics: a - Project A: Initial investment of 150,000. Cash flow of 50,000 at year 1 and 100,000 at year 2. This is a plant expansion project, where the required rate of return is 10 per cent. b - Project B: Initial investment of 200,000. Cash flow of 200,000 at year 1 and 111,000 at year 2. This is a new product development project, where the required rate of return is 20 per cent.
c - Project C: Initial investment of 100,000. Cash flow of 100,000 at year 1 and 100,000 at year 2. This is a market expansion project, where the required rate of return is 20 per cent.
Assume the corporate discount rate is 10 per cent. Please offer your recommendations, backed by your analysis.
A B C Implication / Decision Pay Back IRR NPVStep by Step Solution
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