Required:

1. Compute the net present value for the investment proposal. (Present value tables are available on the next page).(12 marks)

2. Identify two stakeholder groups relevant to this investment proposition and, for each group, describe how they may be impacted if the proposal is accepted. Based on your answers in (1) and (2) so far, provide a recommendation as to whether Highwind Airport should implement this expansion proposal. (Seven or fewer sentences that covers the main points are sufficient). (7 marks)

Highwind Airport is proposing a $800 million expansion of its airport located in a city named Gaia. The expansion will require initial investment in the following: additional planes ($420 million), land acquisition ($180 million), runway construction ($60 million), and additional machines and equipment ($140 million). The annual increases in cost and revenue are projected as follows: $ millions Depreciation 20 Incremental revenue 120 Maintenance cost 10 The additional long-term assets acquired for this proposal will require major maintenance at the end of every nine years, which is expected to cost a total of $25 million each time the maintenance is performed. Highwind Airport requires a rate of return of 9%. Assume a time horizon of 20 years. Ignore tax implications. The expansion will double current flight capacity, increasing international and domestic travel to this popular tourist destination. However, environmental activists have voiced concerns that this expansion goes against addressing the climate emergency, as more flights would lead to higher levels of carbon emissions emitted into the atmosphere. Additionally, the expansion requires acquisition of the land of a neighbouring golf course. The golf course has been in operation for more than a century and has a loyal local customer base. The Gaia City Council has also proposed acquiring the golf course for housing development to address current and projected housing shortages. PVIF Period 1% 4% 5% 7% 8% 9% 10% 2% 3% 0.980 0.971 0.962 0.952 6% 0.943 0.935 0.926 0.917 1 0.909 0.990 0.980 2 0.873 0.857 0.842 0.826 3 0.971 0.816 0.794 0.772 0.751 0.961 0.943 0.925 0.907 0.890 0.942 0.915 0.889 0.864 0.840 0.924 0.888 0.855 0.823 0.792 0.906 0.863 0.822 4 0.961 0.763 0.735 0.708 0.683 5 0.951 0.784 0.747 0.713 0.681 0.650 0.621 6 0.942 0.888 0.837 0.790 0.746 0.705 0.666 0.630 0.596 0.564 7 0.933 0.871 0.813 0.760 0.711 0.665 0.623 0.583 0.547 0.513 8 0.923 0.853 0.789 0.731 0.677 0.627 0.582 0.540 0.502 0.467 9 0.914 0.837 0.766 0.703 0.645 0.592 0.544 0.500 0.460 0.424 10 0.905 0.820 0.744 0.676 0.614 0.558 0.508 0.463 0.422 0.386 11 0.896 0.804 0.722 0.650 0.585 0.527 0.475 0.429 0.388 0.350 12 0.887 0.788 0.701 0.625 0.557 0.497 0.444 0.397 0.356 0.319 13 0.879 0.773 0.681 0.601 0.530 0.469 0.415 0.368 0.326 0.290 14 0.870 0.758 0.661 0.577 0.505 0.442 0.388 0.340 0.299 0.263 15 0.861 0.743 0.642 0.555 0.481 0.417 0.362 0.315 0.275 0.239 16 0.853 0.728 0.623 0.534 0.458 0.394 0.339 0.292 0.252 0.218 17 0.844 0.714 0.605 0.513 0.436 0.371 0.317 0.270 0.231 0.198 0.180 18 0.836 0.700 0.587 0.494 0.416 0.350 0.296 0.250 0.212 19 0.828 0.686 0.570 0.475 0.396 0.331 0.277 0.232 0.194 0.164 20 0.820 0.673 0.554 0.456 0.377 0.312 0.258 0.215 0.178 0.149 PVIFA Period 1% 2% 4% 6% 7% 8% 9% 10% 3% 5% 0.971 0.962 0.952 1 0.943 0.935 0.926 0.917 0.909 1.913 1.886 1.859 1.783 1.759 1.736 0.990 0.980 1.970 1.942 2.941 2.884 3.902 3.808 4.853 4.713 1.833 1.808 2.673 2.624 2.577 2.829 2.775 2.723 2.531 2.487 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.170 4.580 4.452 4.329 4.212 4.100 3.993 3.890 3.791 5.795 5.601 5.417 5.242 5.076 4.917 4.767 4.623 4.486 4.355 6.728 6.230 6.002 5.786 5.582 5.389 5.206 5.033 4.868 6.472 7.652 7.325 7.020 6.733 6.463 6.210 5.971 5.747 5.535 5.335 9 8.566 8.162 7.786 7.435 7.108 6.802 6.515 6.247 5.995 5.759 10 9.471 8.983 8.530 8.111 7.722 7.360 7.024 6.710 6.418 6.145 11 10.368 9.787 9.253 8.760 8.306 7.887 6.495 7.499 7.139 6.805 8.863 8.384 7.943 12 11.255 10.575 9.954 9.385 6.814 13 12.134 11.348 10.635 9.986 9.394 7.103 14 13.004 12.106 11.296 10.563 7.367 15 13.865 12.849 7.536 7.161 8.853 8.358 7.904 7.487 9.899 9.295 8.745 8.244 7.786 11.938 11.118 10.380 9.712 9.108 8.559 8.061 7.606 14.718 13.578 12.561 11.652 10.838 10.106 9.447 8.851 8.313 7.824 15.562 14.292 13.166 12.166 11.274 10.477 9.763 9.122 8.544 8.022 18 16.398 14.992 13.754 12.659 11.690 10.828 10.059 9.372 8.756 8.201 19 17.226 15.678 14.324 13.134 12.085 11.158 10.336 9.604 8.950 8.365 18.046 16.351 14.877 13.590 12.462 11.470 10.594 9.818 16 17 20 9.129 8.514 234567 7 8