In-class Airline problem: Corporate Jet Alt. Yearly Costs (Assuming 52 weeks/yr)
ID: 426202 • Letter: I
Question
In-class Airline problem: Corporate Jet Alt. Yearly Costs (Assuming 52 weeks/yr) Crew cost: 223,000 Fuel cost: $2.10 x 9000 miles/trip x 3 trips/week x 52 weeks/year Landing costs: $250/landing x 6 landings/week x 52 weeks Maintenance: $237,500 Insurance: S166,000 Catering: $75 x 20 passenger's/trip x 3 trips/week x 52 weeks ADD ALL THE ABOVE COSTS, THIS WILL BE ANNUAL COSTS (A) FOR 15% YEARS Then you have benefits in YEAR 15 $2,000,000 (F) Commercial Airline Alt. Yearly Costs $4,000 per trip x 20 passenger's x 3 trips/week x 52 weeks/yr. Benefits 0 Find PWB and PWC, then NPW for both Alt. Make the choiceExplanation / Answer
Ans:- For corporate Jet Alt:-
PWB = $2,000,000/(1+0.15)^15 = $245,790.8
Total cost in 15 years = Crew cost + Fuel cost + Landing cost + Maintenance + Insurance + Catering cost
= 223000 + 2948400 + 78000 + 237500 + 166000 + 224640 = $3,877,540
So, PWC = $3,877,540/(1+0.15)^15 = $476,531.9
NPW = PWB - PWC = 245790.8 - 476,531.9 = -$230,741
For commercial airline:-
PWB = 0
PWC = 4000*20*3*52 = $12,480,000
NPW = PWB-PWC = -$12,480,000
So Coporate jet Alt is beenficial.