Question
Compute the NPV and IRR of the ORD-BNA and ORD-MSP projects with a 12% discount rate, 5-year analysis. Cost savings have already been calculated below
Compute the NPV and IRR of the ORD-BNA and ORD-MSP projects with a 12% discount rate, 5-year analysis. Cost savings have already been calculated below exhibit 1, in table 1. Compute on a monthly basis. Show calculations.
| Exhibit 1 | |||||
| Average Daily Freight (lbs) ORD-BNA | |||||
| Boomerang Trucking (.39 per lb.) | |||||
| Shipping Day | Arrival Day | From ORD to BNA | From BNA to ORD | ||
| Mon | Wed | 2,252 | 1,642 | ||
| Tue | Thu | 2,171 | 1,798 | ||
| Wed | Fri | 2,533 | 1,853 | ||
| Thu | Mon | 2,159 | 1,525 | ||
| Fri | Mon | 2,375 | 1,570 | ||
| Weekly Average Total | 11,490 | 8,388 | |||
| Average Daily Freight (lbs) ORD-BNA | |||||
| Sky Freight (1.01 per lb.) | |||||
| Mon | Tue | 314 | 222 | ||
| Tue | Wed | 347 | 212 | ||
| Wed | Thu | 323 | 225 | ||
| Thu | Fri | 422 | 229 | ||
| Weekly Average Total | 1,406 | 888 | |||
| Average Daily Freight (lbs) ORD-MSP | |||||
| Boomerang Trucking (.36 per lb) | |||||
| Shippind Day | Arrival Day | From ORD to MSP | From MSP to BNA | ||
| Mon | Tue | 2,102 | 1,839 | ||
| Tue | Wed | 2,022 | 1,784 | ||
| Wed | Thu | 2,462 | 1,874 | ||
| Thu | Mon | 2,286 | 1,831 | ||
| Fri | Mon | 2,152 | 1,802 | ||
| Weekly Average Toal | 11,024 | 9,130 | |||
| Average Daily Freight (lbs) ORD-MSP | |||||
| Sky Freight (.98 per lb) | |||||
| Mon | Tue | 286 | 205 | ||
| Tue | Wed | 313 | 199 | ||
| Wed | Thu | 299 | 219 | ||
| Thu | Fri | 371 | 225 | ||
| Weekly Average Total | 1,269 | 848 | |||
| Table 1 | ||||||
| Cost Savings ORD-BNA | ||||||
| From ORD (lbs.) | From BNA (lbs.) | Avg Weekly lbs. | Cost per ib. | Weekly total Cost | Monthly total Cost | |
| Boomerang | 11,490 | 8,388 | 19,878 | .39 | 7,752 | 34,885 |
| Sky Freight | 1,406 | 888 | 2,294 | 1.01 | 2,317 | 10,427 |
| TOTAL | 10,069 | 45,312 | ||||
| Cost Savings ORD-MSP | ||||||
| From ORD (lbs.) | From MSP (lbs.) | Avg. Weekly lbs. | Cost per lb. | Weekly total cost | Monthly total cost | |
| Boomerang | 11,024 | 9,130 | 20,154 | .36 | 7,255 | 32,648 |
| Sky Freight | 1,269 | 848 | 2,117 | .98 | 2,075 | 9,337 |
| TOTAL | 9,330 | 41,985 | ||||
| Exhibit 2 | |||
| ORD-BNA | |||
| Item | Cash Outflow | Cash Inflow | Frequency |
| Truck (2) | 1000,000 + 4000 per month | beginning & monthly | |
| Trailer (2) | 30,000 | Beginning | |
| Working Capt. | 25,538 | Beginning | |
| Maintenance | 6,000 | Beginning & annual | |
| Fuel | 5,625 | Monthly | |
| Driver | 8,000 | Monthly | |
| Taxes & tolls | 400 | Monthly | |
| Registration | 500 | Beginning & annual | |
| Cost Savings | ????? | Monthly | |
| Truck Residual | 25,000 | End | |
| Trailer Residual | 3,000 | End | |
| Return of Work Cap | 25,538 | End | |
| ORD-MSP | |||
| Item | Cash Outflow | Cash Inflow | Frequency |
| Truck (2) | 100,000 + 4,000 per month | Beginning & monthly | |
| Trailer (2) | 30,000 | Beginning | |
| Working Capt. | 24,227 | Beginning | |
| Maintenance | 4,800 | Annual | |
| Fuel | 4,751 | Monthly | |
| Driver | 8,000 | Monthly | |
| Taxes & tolls | 400 | Monthly | |
| Registration | 500 | Annual | |
| Cost Savings | ????? | Monthly | |
| Truck Residual | 30,000 | End | |
| Trailer Residual | 3,500 | End | |
| Return of Work Cap | 24,227 | End | |
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The Volatility Surface A Practitioner's Guide
Authors: Jim Gatheral
1st Edition
0471792519, 978-0471792512
