ABC Limited has spent $3 billion on developing a new single board computer over the past 4 years. The company now has 3 mutually exclusive options: 1) The company can manufacture the single board computer itself in which case the plant will cost $5 billion. Additional working capital of $2.1 billion will be required when production commences. The expected sales and selling prices are as follows: Year 1 2 3 4 5 Number sold (in million) 100 100 100 80 80 Selling price ($) 120 120 120 100 90 The company usually depreciates plant of this type over 5 years using the straight-line method and assumes no scrap value. Variable costs are expected to be $65 per unit and other fixed cost is 2,000 million per year. Applicable tax rate for the company is 20%. The company will accept the new product if the new product can payback within 3 years. 2) Sell the know-how to one of its major competitors for a single payment of $3.5 billion. 3) Sell the know-how for a royalty of $10 per unit.

Q. Compute the NPV, payback period and IRR for all 3 options.