Nevada Inc. is considering the purchase of two alternative planes. Plane A has an expected life of 5 years, will cost $100 million, and will produce net cash flows of $40 million per year. Plane B has a life of 10 years, will cost $90 million, and will produce net cash flows of $30 million per year. Company’s cost of capital is 12%.
a) Calculate the NPV of each plane.
b) Calculate IRR of each plane.
c) Calculate MIRR of each plane
d) Calculate the discounted payback period of each plane.
e) Calculate equivalent annual annuity (EAA) of each plane.