Investment Analysis
A plane company wants to upgrade their engines and analyse the investment over the next 5 years. The upgrade costs 800keur, and will require additional trainings in year 1 and year 3, costing 100k and 50k respectively. If you upgrade you will be able to sell your old engines secondhand and recover 300k eur in year 2.
Given:
RAROR = 15% (use as discount rate when calculating NPV)
tax = 14%
total costs for both engines becomes greater every year with 4%
for old engines: year 1 costs for maintenance, wages and fuel = 400k
for new engines: year 1 = 180k
Asked:
Is this a good investment? Perform a cash flow analysis and motivate your answer. [one page only, including calculation space]
Why is a company allowed to depreciate its assets? [half page]
Explain NPV in your own words [half page]