1. BYD automotive must choose between two mutually exclusive projects: an electric-powered car or a hybrid-powered car. A) The hybrid car project calls for investment of $10 million to build plant and assembly lines right now. For the next four years, the project cash flow from the project will be $5 million, $3 million, $4 million, and $3.6 million, respectively. After that, the project will be close down with no salvage value. B) The electric car project calls for $20 million investment to purchase patents and another $10 million to build plant and assembly lines right now. For the next four years, the project cash flow from the project will be $15 million, $8 million, $9 million, and $11 million, respectively. After that, the project will be close down with no salvage value. Assume BYD automotive has $30 million capital available at a cost of capital of 10%. It also has a cutoff payback period of 3 years.

Draw the table of cash flow (careful about positive or negative) for each project.

Project Electric		Project Hybrid
Year	Cash Flow	Year	Cash Flow
0		0
1		1
2		2
3		3
4		4

Based on the capital budgeting decision rules, calculate the Payback period, Net Present Value, and Profitability Index for each project.

Use Excel function to find out the IRRs for both projects.

Would each of the projects be taken if it is the only project available?

Can BYD take both of the two projects? If not, which one should BYD take?

Analyze each alternative decision criteria in part 2) by identifying the pros and cons of each.