Calculate NPV, Payback and IRR

 

Table 1 Net cost of new plane Additional revenue Financial analysis of project A: Add a twin-jet to the company's fleet Additional operating costs Amortization Net increase in income Less: Tax at 33% Increase in aftertax income Add back amortization Net change in cash flow Initial Expenditures $300,000 ($300,000) Year 1 $43,000 11,250 45,000 (13,250) 0 ($13,250) $45,000 31,750 Year 2 $76,800 11,250 66,000 (450) 0 Year 3 65,550 Year 4 $112,300 $225,000 11,250 63,000 38,050 150,750 12,557 49,748 ($ 450) $ 25,494 $66,000 $ 63000 88,494 11,250 63,000 $101,003 $ 63,000 164,003 Year 5 $168,750 11,250 63,000 94,500 31,185 $ 63,315 $ 3,000 126,315