Answered step by step
Verified Expert Solution
Question
1 Approved Answer
ly High Inc. intends to invest in a new airplane. Information regarding the investment in the airplane is given below: Line Item Description Project A
ly High Inc. intends to invest in a new airplane. Information regarding the investment in the airplane is given below: Line Item Description Project A Life of project 5 years Initial investment $29,561,340 Net annual after-tax cash inflow $7,600,000 The cost of capital for the company is 11%. Calculate the internal rate of return (IRR) for the new airplane.
Step by Step Solution
★★★★★
3.39 Rating (146 Votes )
There are 3 Steps involved in it
Step: 1
To calculate the internal rate of return IRR for the new airplane investment we can use the discounted cash flow DCF method Given information Life of the project 5 years Initial investment 29561340 Net annual aftertax cash inflow 7600000 Cost of capital 11 Step 1 Determine the present value of the net annual cash inflows Present value of the net annual cash inflows 7600000 1 1 1 0115 011 Present value of the net annual cash inflows 27009893 Step 2 Calculate the net present value NPV of the investment NPV Present value of the net annual cash inflows Initial investment NPV 27009893 29561340 NPV 2551447 Step 3 Calculate the internal rate of return IRR The IRR is the discount ...
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Introduction To Corporate Finance
Authors: Laurence Booth, Sean Cleary
3rd Edition
978-1118300763, 1118300769
