Decision-Making with Relevant Costs at Airbnb

• Values:
  • Relevant Costs of New Project: $5,000,000
  • Expected Annual Revenue: $3,000,000
  • Project Duration: 3 years
  • Discount Rate: 12%
• Requirements:

1. Calculate the net present value (NPV) of the new project for Airbnb.
2. Determine the internal rate of return (IRR) and payback period.
3. Discuss how relevant costs impact strategic decisions at Airbnb.
4. Recommend whether Airbnb should proceed with the project based on financial analysis.