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.

Answer rating: 100% (QA)

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 ... View the full answer