Q2. Fly-away-and-never-come-back Airlines is considering buying a new set of four 737-type aircraft each of which will cost $1.6m. Since these planes are identical, they will all last 15 years before they require replacement, and will each have a salvage value of $500, 000 at the end of this period. To operate these planes, the airline will have to pay a total yearly operating cost of $700, 000 (note that this covers all planes). What is the equivalent annual cost of operating this set of 4 planes if the interest rate is 12% compounded annually? In the process, identify the operating cost and the capital recovery costs.

Q2. Fly-away-and-never-come-back Airlines is considering buying a new set of four 737-type aircraft each of which will cost $1.6m. Since these planes are identical, they will all last 15 years before they require replacement, and will each have a salvage value of $500, 000 at the end of this period. To operate these planes, the airline will have to pay a total yearly operating cost of $700, 000 (note that this covers all planes). What is the equivalent annual cost of operating this set of 4 planes if the interest rate is 12% compounded annually? In the process, identify the operating cost and the capital recovery costs.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 10P

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