What Is the Profitability Index of the Airbus A380 Project

question 58

Multiple Choice

What is the Profitability Index 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.Assume that Airbus' cost of capital is 11%.Calculate the Profitability Index as of Dec 31,2008.Assume that there are no terminal year cash flows.

• A) 0.935
• B) 0.981
• C) 0.995
• D) 1.333
• E) 1.981

Explain the paradox of thrift and its economic implications.

Understand the process and requirements for passing fiscal policy measures.

Evaluate policies to address inflationary and deflationary gaps and their impact on full employment GDP.

Assess the impact of fiscal policy decisions on the national debt and budget deficits/surpluses.

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Definitions:

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Biosphere 2

An Earth system science research facility located in Arizona, USA, designed to study and model the interactions within ecosystems in a closed system.

Self-Sustainability

The ability of a system, community, or individual to maintain and support itself without relying on external resources.