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  • SensitivityAnalysis - Keshav Kumar Choudhary (2023PGP344)

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    The document compares the net present value of purchasing an aircraft engine versus a sale and leaseback option, showing that the sale and leaseback results in a less negative NPV of -7750044.49 compared to a NPV of -8011822.03 for purchase. It also provides sensitivity analyses examining the impact on NPV of changing variables like the residual value, escalation rate, and lease rental rate.

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    SensitivityAnalysis_Keshav Kumar Choudhary(2023PGP344)

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    The document compares the net present value of purchasing an aircraft engine versus a sale and leaseback option, showing that the sale and leaseback results in a less negative NPV of -7750044.49 compared to a NPV of -8011822.03 for purchase. It also provides sensitivity analyses examining the impact on NPV of changing variables like the residual value, escalation rate, and lease rental rate.

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    2 views7 pages

    SensitivityAnalysis - Keshav Kumar Choudhary (2023PGP344)

    Uploaded by

    You know who
    The document compares the net present value of purchasing an aircraft engine versus a sale and leaseback option, showing that the sale and leaseback results in a less negative NPV of -7750044.49 compared to a NPV of -8011822.03 for purchase. It also provides sensitivity analyses examining the impact on NPV of changing variables like the residual value, escalation rate, and lease rental rate.

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    of 7

    Purchase

    1 2
    Year 2006 2007 2008
    Upfront -1259175
    Remaining -7135325
    Residual Value
    Depreciation Tax shield 117523 117523
    Maintenance Cost
    TOTAL -8394500 117523 117523
    NPV @ 6% -8011822.03

    Engine Price 8150000


    Escalation 3%
    Escalated Engine Price 8394500
    Tax Rate 17.50%
    Upfront 15%
    Remaining 85%
    Residual value 1678900
    Depreciation (per year) 671560
    Depreciation tax shield 117523

    Sale & Lease Back


    1 2
    Year 2006 2007 2008
    Deposit -201468
    Lease Rental -805872 -805872
    Tax Shield on Lease Rental 141027.6 141027.6
    TOTAL 0 -866312.4 -664844.4
    NPV @ 4.71% -5272080.49

    Maintenance Reserves
    Flight Hour Reserves -185848 -371696
    Flight Cycle Reserves -81030 -162060
    Maintenance Reserve Claim
    Maintenance Cost
    TOTAL -266878 -533756
    NPV @ 6% -2477964.00
    TOTAL NPV -7750044.49 sale & lease back is less negative com

    Engine Price 8150000


    Escalation 3%
    Escalated Engine Price 8394500
    Tax Rate 17.50%
    Lease Rental 0.80% monthly
    Lease Rental 67156 monthly
    Lease Rental 805872 annually
    Deposit (3 months) 201468
    Purchase
    3 4 5 6 7 8 9
    2009 2010 2011 2012 2013 2014 2015

    117523 117523 117523 117523 117523 117523 117523


    -1900000
    117523 117523 -1782477 117523 117523 117523 117523

    Sale & Lease Back


    3 4 5 6 7 8 9
    2009 2010 2011 2012 2013 2014 2015

    -805872 -805872 -805872 -805872 -805872 -805872 -805872


    141027.6 141027.6 141027.6 141027.6 141027.6 141027.6 141027.6
    -664844.4 -664844.4 -664844.4 -664844.4 -664844.4 -664844.4 -664844.4

    -371696 -371696 -371696 -278772


    -162060 -162060 -162060 -121545
    1672632
    -1900000
    -533756 -533756 -761124 0 0 0 -400317

    e & lease back is less negative compared to purchase option


    SENSITIVITY ANALYSIS
    10
    2016 Impact of Change in RV
    NPV of purchase -8011822
    3000000
    1678900 2147704
    117523 1678900
    1500000
    1796423 1200000

    Impact of Change in Escalation


    NPV of Sale & lease back -7750044
    1%
    3%
    5%

    Impact of Change in Escalation


    NPV of Purchase -8011822
    1%
    3%
    5%

    10
    2016
    201468
    -805872
    141027.6
    -463376.4

    -92924
    -40515

    -133439
    SENSITIVITY ANALYSIS

    Lease Rental
    805872 1% 3% 5%
    0.90%
    0.80%
    0.60%
    0.40%

    Impact of Change in Escalation


    RV 1678900
    1%
    3%
    5%

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