2. A budget airline is considering buying one more aircraft for domestic flights and wishes to undertake a financial analysis of the proposal. The aircraft has a life of 20 years and is expected to achieve an average 650 flights per year with an average capacity of 100 passengers per flight which can be sold at $250 per ticket starting at the end the first year. The ticket price is expected to rise (starting at the end of second year) with general rate if inflation which is 5% per year over the life of the aircraft. Total investment will be $70 million at the beginning of the first year. Annual operating costs in the beginning of each year starting in year 2, are expected to be: 1) Fuel per year: 24000 liters at a price of $40 per liter. 2) Labor: $2.5 million 3) Maintenance: $2 million 4) Overhead: $1 million Right after the second year, inflation will occur. Fuel price is expected to rise by 5%, labor costs by 8%, maintenance costs by 3% and overhead by 4%. a. Calculate net present value and benefit cost ratio for this project. Assume that the discount rate is 10%. Given the values you derived should the budget airline buy one more aircraft for domestic flight? You can type your answer in the sheet. b. From society's point of view, can you think of any other costs that are missing and should be included in evaluating if the purchase of one more aircraft should go through or not? Give a brief explanation. You can type your answer in the sheet.

We are examining a new project. We expect to sell 8,800 units per year at $191 net cash flow apiece (including CCA) for the next 16 years. In other words, the annual operating cash flow is projected to be $191 × 8,800 = $1,680,800. The relevant discount rate is 10%, and the initial investment required is $5,590,000. Suppose you think it is likely that expected sales will be revised upward to 9,550 units if the first year is a success a. If success and failure are equally likely, what is the NPV of the project? Consider the possibility of abandonment in answering. (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.)   NPV $   b. After the first year, the project can be dismantled and sold for $2,846,000. What is the value of the option to abandon? (Negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.)   The value…

Emerald Enterprises is developing a new product at the cost of $ 50,000. The new product is expected to increase the cash flow for the next five years as follows: $ 10000, $ 15000, $ 15000, $ 20000 and $ 20000. Find the payback period. (Note: Roundup the fractional values; that is if the payback period is 6.23 years, enter 7 years as payback period) 4 years 5 years 3 years 2 years

Emerald Enterprises is developing a new product at the cost of $ 50,000. The new product is expected to increase the cash flow for the next five years as follows: $ 10000, $ 15000, $ 15000, $ 20000 and $ 20000. If the discounting rate is 12%, what is the Net Present Value of the investment? $ 5622.08 $ 30000.00 $ 17022.81 $ - 560.90