Consider the following three projects

The cost of capital for the company is 12%.

1. If you apply the payback criterion, which project will you choose? Why?

2. If you apply the NPV criterion, which project will you choose? Why?

3. If you apply the IRR criterion, which project will you choose? Why?

4. If you apply the profitability index criterion, which project will you choose? Why?

5. Based on your answers in (1) through (4), which project will you finally choose? Why?