1. What is the NPV of each of the options below at a 10% discount rate?

2. What is the equivalent annual cash flow of each of the options at a 10% discount rate?

3. Which is the better option? Why?

A: Buy 10 new planes for $100 million total; only generates $1 million annually (total for all planes) in maintenance and energy costs over a 30 year period.

B: buy 10 used planes for $20 million total; annual costs are $10 million per year for 20 years

C: lease for no upfront costs; annual lease for all 10 planes is $8 million plus $4 million in annual costs over 10 years. (show work for cash flow and formulas)