A doctor is on contract to a medium-sized oil company to provide medical services at remotely located, widely separated refineries.The doctor is considering the purchase of a private plane to reduce the total travel time between refineries. The doctor can buy a usedLearjet 31A now for $1.700 million or wait for a new very light jet (VLJ) that will be available 3 years from now. The cost of the VLJ willbe $2.600 million, payable when the plane is delivered in 3 years. The doctor has asked you, his friend, to determine the presentworth of the VLJ so that he can decide to buy the used Learjet now or wait for the VLJ. The MARR is 14.00% per year, and the inflationrate is projected to be 3.200% per year.a) What is the present worth of the VLJ with inflation considered?b) Which plane should he buy?The present worth of the VLJ with inflation considered isHe should buy the used Learjet now ✓

Given the following data,MARR (r) = 14.00% = 0.14Inflation rate (f) = 3.2% = 0.032Now we know the…

Answered: A doctor is on contract to a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A doctor is on contract to a medium-sized oil company to provide medical services at remotely located, widely separated refineries. The doctor is considering the purchase of a private plane to reduce the total travel time between refineries. The doctor can buy a used Learjet 31A now for $1.1 million or wait for a new very light jet (VLJ) that will be available 3 years from now. The cost of the VLJ will be $2.1 million, payable when the plane is delivered in 3 years. The doctor has asked you, his friend, to determine the present worth of the VLJ so that he can decide to buy the used Learjet now or wait for the VLJ. The MARR is 15% per year and the inflation rate is projected to be 3% per year. (a) What is the present worth of the VLJ with inflation considered? (b) Which plane should he buy?
Nathan and Stephanie are saving for their daughter's college education. Their daughter, Paige, is now 8 years old and will be entering college 10 years from now (t = 10). College tuition and expenses at State U. are currently $16,000 a year and are expected to increase at a rate of 4% a year. They expect Paige to graduate in 4 years (if Paige wants to go to graduate school, she's on her own). Tuition and other costs will be due at the beginning of each school year (at t = 10, 11, 12, and 13). So far, Nathan and Stephanie have built up $9,000 in the college savings account. Their long-run financial plan is to contribute $3,000 a year at the beginning of each of the next five years (at t = 0, 1, 2, 3, and 4). Then they plan to make 6 equal annual contributions at the end of each of the following 6 years (t = 5, 6, 7, 8, 9, and 10). Their investment account is expected to earn 8%. How large must the annual payments be in the subsequent 6 years (t = 5, 6, 7, 8, 9, and 10) to meet their…
The monthly demand for ice cans being manufactured by Mr. Cruz is 3,200 pieces. Witha manually operated guillotine, the unit cutting cost is P25.00. An electrically operatedhydraulic guillotine was offered to Mr. Cruz at a price of P275,000 and which will cut by30% the unit cutting cost. Disregarding the cost of money, how many months will Mr. Cruzbe able to recover the cost of the machine if he decides to buy now?
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XYZ corporation has budgeted P300,000 per year to pay for labor over the next five years. If thecompany expects the cost of labor to increase by P10,000 each year, what is the expected cost ofthe labor in the first year, if the interest rate is 10%

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