1. JTM Airlines, a privately held firm, is looking to buy additional gates at its home airport for $1,500,000. It has money in the bank, but that money may not be spent as it is used to pay salaries, suppliers, and equipment. It asked its bank for a loan, but the bank refused unless the project had a return higher than JTM's weighed average cost of capital. Separately, PAN Airways's CEO approached JTM's CEO to sell the airline. As a result of all this, JTM has contracted you to:

2. Aside from the purchase price, the gates will require a working capital infusion of $1,500,000 at purchase. JTM estimates the gates will generate cash flows of $295,500 in year 1, inflating at 4%/year over the next 12 years. After that, the gates will revert back to the airport operator. Half the working capital is recovered at the end. Calculate the NPV and IRR of the gates. WACC 6%

3. PLEASE SHOW IN EXCEL FORMULAS!

B D E F G H 1 J K L M N Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 295,500 Start 2 Investment (1,500,000) 3 Working Capital (1,500,000) 4 Operating Cash Flow 5 Total Cash Flow (3,000,000) 6 7 NPV 8 IRR 9