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Determining the annual discount rate

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Reference no: EM132510048

An English businessman wants to take up Elon Musk's idea and build "tubes" under a big city, in which cars are thrown at high speed to reach the airport in a few minutes, avoiding traffic jams. The chief estimates that the initial investment will amount to €496 million, minus €410 million in combined aid from the government, the regional council and the city. The company director also estimates that the cash flow will be €9 million per year.

Having studied finance at university, he wants to calculate the payback period while taking into account the time value of money. What is the payback period? That is, what is the "N" such that the NPV cancels itself out?

You will take 6.6% as the annual discount rate. That's the cost of capital to the entrepreneur.

Reference no: EM132510048

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