Amanda considers that all projects are equally risky and therefore used 13% as the minimum acceptable rate of return. The company uses a straight-line method for calculating depreciation and the companys tax rate is 30%.

Proposal A:

This proposal is to add a jet to the companys fleet. The plane was only six years old and was considered a good buy at $300,000. In return, the plane would bring over $600,000 in additional revenue during the next five years with only about $56,000 in operating costs.

	YR-0	YR-1	YR-2	YR-3	YR-4	YR-5
Initial investment	(300,000)
Additional Revenue		43,000	76,800	112,300	225,000	168,750
Additional operating costs		11,250	11,250	11,250	11,250	11,250
Depreciation		60,000	60,000	60,000	60,000	60,000

1. Calculate the Cash flows for each of the proposals.
2. Calculate the following for each of the proposals in the case
   1. Payback period (PBP)
   2. Net Present value (NPV)
   3. What would happen if operating cost were 10% higher than expected?
   4. What would happen if operating costs were 10% lower than expected?