Need solutions and answers for this question. (a) and (b)

Problem 2: Airbus A380. Airbus Industrie has launched their A380 superjumbo (formerly known as A3XX), which will be the world's largest passenger plane. This question addresses the viability of that project. You should read the attached Wall Street Journal article from November 30, 2000. We will use the data from the attached article and some additional assumptions stated below to evaluate the A380 project as of the year 2000 (i.e. use the year 2000 as time 0). Costs. Assume that the investment costs of $11 billion are pre-production costs that are incurred in equal increments in years 2001 to 2004 (i.e. are incurred at time 1, 2, 3, and 4). Note: We use $11 billion here, since of the $12 billion stated in the article $1 billion has already been paid and is thus irrelevant for the decision on whether to proceed with the project or not. Therefore, ignore this $1 billion in all of your calculations. Assume that the production phase begins in 2005 and that the production rate (number of planes produced per year) is constant for 20 years (i.e. the first A380 is produced in 2005 and the last in 2024). Furthermore, the per plane production costs, which we will compute, are assumed to be constant throughout. Revenues. Deliveries of planes lag production by one year, i.e., deliveries of a constant number of planes per year occur between 2006 and 2025. The catalog price of the A380 is $230 million and all planes are expected to sell at this price except the firrst 44 planes, which go to the launch customers at a 30% discount. Assume that 25% of the price is due 2 years before delivery and the rest at the time of delivery of the plane. (a) Airbus officials say that they need 200 orders to break even on the project. It turns out that this Airbus calculation assumes an interest rate of zero (this crucial piece of information is omitted from the WSJ article). Using an interest rate of zero, calculate the per plane production cost that Airbus is assuming (i.e. pick the number for the per plane production cost that sets the net present value of project cash flows to zero for r=0). Hint: Set up a spreadsheet with the cash flows in each year. Use the Excel function Solver to solve for the per plane production cost that sets the NPV to zero. (b) Suppose, more realistically, that the appropriate interest rate is r=10% per year. Assume again that Airbus delivers a constant number of planes per year between 2006 and 2025 and that the first 44 planes are sold at a 30% discount. Work out how many planes Airbus would have to sell to break even (i.e. to have a zero net present value of the A380 project) at a 10% interest rate. Use the per plane production cost that you calculated in (a). Hint 1: Use the Excel function Solver. Hint 2: Dealing with the 44 planes that are sold at a discount requires a bit of thought. Denote the total number of planes Airbus delivers over the 20 year period from 2006 to 2025 by N. Take my word that: In 2006 all N/20 planes delivered are discounted. In 2007, 44-(N/20) planes are discounted, N/20-(44-N/20) are not. From 2008 on, none of the planes are discounted. Hint 3: Do not worry about rounding. It is ok if the number of planes to be delivered each year is not a whole number (an integer)