Show work for the following questions.
A corporate executive jet with a seating capacity of 20 has the following cost factors:
Item Cost
Initial cost $12,000,000
Service life 15 years
Salvage value $2,000,000
Crew costs per year $225,000
Fuel cost per mile $1.10
Landing fee per landing $250
Maintenance costs per year $237,500
Insurance costs per year $166,000
Catering cost per passenger round trip $75
The company flies three round trips from Boston to London and back per week, a distance of 3,280 miles one way. How many passengers must be carried on an average round trip in order to justify the jet if alternative commercial airline first-class round trip fare is $ 3,400 per passenger? The firm’s MARR is 15%.
Consider the following six alternatives. They have 20-year useful lives and no salvage value. If the minimum attractive rate of return is 6%, which alternative should be selected?
A B C D E F
Cost $ 4,000 $ 2,000 $ 6,000 $ 1,000 $ 9,000 $ 10,000
PW of benefit $ 7,330 $4,700 $ 8,730 $1, 340 $9,000 $ 9, 500
1.83 2.35 1.46 1.34 1.00 0.95
Find Expected return, variance and standard deviation of each of the following stocks.
State of Economy Probability of State of economy Stock A return Stock B return Stock C return
Boom 0.2 0.15 0.2 0.12
Normal 0.5 0.19 0.14 0.1
Bust 0.3 -0.02 -0.08 0.04
Consider the following projects’ cash flows:
End of year(n) Project A Project B Project C Project D
0 -$1000 -$3000 $2,000 -$4000
1 $200 $2,000 -$600 -$1,000
2 $500 $2,000 -$600 $6,000
3 $600 -$1,500 -$600 0
4 $400 $2,000 -$600 $2,000
A. Which of the following statements is correct? ==
a. Project A is the only simple investments.
b. Projects A and D are the only projects that will have a unique positive rates of return.
c. Project B is the only non-simple investment.
d. None of the above.
B. Find IRR for Project A. Is Project A acceptable at MARR = 20%?
C. Find IRR for Project C. Is Project C acceptable at MARR = 6 %?
C. Which project between A and C will you choose at MARR =10%?
Thank you
