What is the NPV of the Airbus A380 project? The Airbus A380 is the largest civilian aircraft ever built.It can carry 555 passengers on two decks.Initial project investments were $13B.Assume that the initial investment was paid on Dec 31,2008.Assume that Airbus will produce 60 aircraft per year for five years.Each aircraft will be sold for $230M and total operating costs are 75% of revenues.Assume that revenues and costs occur at year-end with the first revenues (and costs)occurring on Dec 31,2009.What is the NPV of the project if Airbus' cost of capital is 11%? Calculate the NPV as of Dec 31,2008.Ignore taxes and assume that there are no terminal year cash flows.
A) -$2.799B
B) -$0.249B
C) $0.078B
D) $2.751B
E) $25.253B

Question

Quizplus · Accepted Answer

Step 1 - Calculate the amount of each cash flow.
$230,000,000 × 60 × 0.25 = $3,450,000,000
Step 2 - Use the cash flow amount and solve like an annuity.
NPV = PMT 11ea7fdb_fbe2_a06a_a768_db6949195c56_TB2902_11 - Initial Investment
NPV = 3,450,000,000 11ea7fdb_fbe2_a06b_a768_9b7eb7f18080_TB2902_11 - 13,000,000,000 = -$249,155,289

What Is the NPV of the Airbus A380 Project? the Airbus