Question
1. NPV Rule An airline considers purchasing a new airplane. The purchase requires the company to pay $10 million today. Once taken, the new airplane
1. NPV Rule An airline considers purchasing a new airplane. The purchase requires the company to pay $10 million today. Once taken, the new airplane is expected to deliver $15 million in one year. The interest rate is 10% per year.
(a) What is the NPV of this project? According to the NPV rule, is it worth investing?
(b) Suppose that the company does not have any cash in hand. Instead, it finances the purchase by borrowing money from bank and repaying $15 million in one year. What is the resulting cash flow from the project and the bank loan combined?
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An Introduction To Wavelet Theory In Finance
Authors: Francis In, Sangbae Kim
1st Edition
9814397830, 978-9814397834
