A revenue of 350,000,000 is the expected annual profits of owning a certain jet plane. The cost of acquisition is 3,600,000,000. The company must pay one quarter of the cost now and the remaining 3 quarters to be paid two years from now. The company is planning to use the plane for 8 years after which it is to be sold for one half of the original price.
what is the discount pay back? what is the net present value if cost of capital is 14%? what is the IRR? should the project be undertaken or not?
The NPV is -992,267,300 @ a 14% discount rate.
The IRR is 3.67%
A discounted payback period can not be calculated unless the discount rate is less than the IRR.
The project should not be undertaken because you have a negative NPV and the IRR although it is positive is very low.