Transportation Alternatives Have Different Lives : Contract Flight Time Option Essay

Here is a rundown of the variables we used to first determine the cash flows for Years 0 through 10: depreciation of equipment over the 10 years, sales minus COGS to identify gross profit, summed expenses (advertising, start-up, and Jell-o erosion only; the test market expense in Year 1 is considered a sunk cost and thus should not be included), and subtracted taxes to come up with the cash flow. When assessing the below issues, the team concluded the following

Southwest Airlines is a company that is known for its low ticket prices and profitability despite the highly risky industry in which it operates. This essay examines the cost behavior, cost volume profit (CVP), activity based costing (ABC), budgeting process, costing and decision making policies of the firm. The essay will discuss how the airline integrates these concepts in its daily operations.

With the BCG Matric analysis, we can argue that Easy Jet enjoys a viable competitive position because of its actual market growth. However, its prices have been compared with those of rival firms. This has clarified that Easy Jet emphasizes on being a low-cost carrier with no surplus in-flight services. Writers such as Quelch & Deshpande (2004, p. 71) argue that the Boston Consulting Group growth/share matrix has offered an opportunity to establish the market share of Easy Jet and the company's growth rate. In the context of the company's low cost market, it is clear that the market is still are still increasing. In addition, with the current fleet volume of 80 aircrafts, Easy Jet can serve 160 routes across Europe. Industry experts have associated such massive penetration with the rise in numbers of passengers and a relative rise in market share. Consequently, it is clear that the company has become a star. Nevertheless, Easy Jet must expand its market share for it to transform into a source of income after the decline of the market's growth rate. With respect to the company's Boston Consulting Group growth/share matrix analysis, we can claim that the cash flow of Easy Jet from operating activities have declined as well as the annual finances. Nevertheless, the acquiring firm's cash flow statement is the main area of focus (Butler &

The third scenario was ignoring the option to invest in the second-generation project and selling the equipment in year 2. We evaluated this option as a put option. First, we calculated the probabilities for going up and down based on the assumption of a risk neutral word. As a result, the probability of going upward is calculated as 0.3375 and downward probability is 0.6625. In order to determine the present value of all the sequence cash flow at the end of year 2, we calculated the upside change rate and downside change rate as 64.87% and -39.35%, respectfully. The next step is to analyze the option value by using the “Binomial Tree” method. In order to determine the present value of all the subsequence cash flow at the end of year 2, we calculated the cash flow at each node on the tree, until 2006. We discounted all the cash flow at the risk free rate at 10%. The End of Year NPV of all the subsequence cash flow at Year 2 is calculated as $7,571,752, and the selling price of the equipment at end of 2 is $4,000,000, which is the salvage value. We found the NPV of selling the machine at end of Year 2 to be -$2,951,861 as of Year 0, which is negative. The APV of the project after adding the option turned out to be -$6,321,932. This negative APV suggest that the

| |iv. Service quality cost savings – Controllable and relevant – With the 6 supplier option the company saves $100,000 in|

2) Compare the articles with the contract services account information. Do you notice anything that might lend credence to your theory that Syntech could be a shell company?

4. Ben believes that the appropriate analysis is to calculate the future value of each option. How would you evaluate this statement?

(u) “Escrow Amount” means $300,000 delivered in accordance with section 2.2(c), together with all interest earned thereon.

Our approach to valuing the processing plant can easily be decomposed into three distinct steps first, find the value of the foreseeable free cash flows. Next, calculate the terminal value of the project. Finally, take the present value of those flows. The next few paragraphs walk through each of these steps in order of progression.

The purpose of this memorandum is to address the profitability issues at Continental Airlines and to estimate the costs for 2009 to forecast the future outlook of the company. To address these issues, I used regression analysis to observe what effect the 11% reduction in flying capacity would have on the firm’s future operating costs. I also used the results from the regression analysis to verify the costs that, if reduced, would further comply with the implementation of cost-cutting initiatives and operational efficiencies that the company is striving for. Lastly, I consolidated the data to forecast Continental’s financial outlook for 2009, then provided insight

147 (1) Assume that BlueSky purchases three identical aircraft. How many coach seats should BlueSky order for the three new aircraft? (2) Now suppose that the three aircraft can be different sizes, between 240 and 380 coach seats. (a) How do you think the three aircraft should be allocated among the six routes? In other words, should the same aircraft always fly the same routes? Why or why not? (Hint: You do not need an optimization model to answer this question). (b) How many coach seats should BlueSky order for each of the three new aircraft? (3) Because it is cheaper to manufacture three identical planes, Airbus is offering BlueSky a one-time, $5 million discount if it will order three identical aircraft. Should BlueSky take the discount? In deciding this, you may assume that BlueSky operates 3 banks per weekday through Houston, and that the revenues and demands for every bank on every weekday are equal to the demands in Tables 1 and 2 of the (A) Case.

To calculate the total costs involved for each of the three options, I have considered only those factors that are not common in all. I have calculated only the excess of cost that might be required to deploy an option.

The present value of all these cash inflows and outflows can be calculated by discounting them at 12.19%. This rate is calculated by assuming that the purchasing power parity holds in this scenario. The company can do the feasibility analysis by looking at both from the subsidiary’s and parent’s perspective by assuming that the purchasing power parity holds. Hence, this rate can be regarded as opportunity cost of investment because it is the second best alternative for the company for investment purposes.

Importantly, profits ratio reveal performance and the efficiency of the airline business, and therefore it’s highly valued, not only by the management but also the investor’s perspective. From the financial perspective, southwest has been a tremendous increase in their operating revenue for the last two decades, and therefore this cost tends to be higher than the average airline industry operating cost. Important, the airline lack a significant performance boost, and therefore outweighed by their close rival. Subsequently, the company profits ratios seem to deteriorate progressively. Other, internal factors adversely affect operating cost in the Southwest Airline, unlike another airline, include high salaries for pilots, flight attendants and mechanics emerging to be the highest paying in this industry.

An aircraft is one of the most important aspects in the success of the aviation industry since airlines cannot operate without it. Considering that there are many advantages and disadvantages of old and new aircraft, many airlines have difficulty when it comes to deciding whether to buy a brand-new aircraft or just use an old one. That critical decision will be the starting point of either the success or failure of an airline operation. According to Wyndham (2015), there are two significant areas in arriving at the purchase decision: looking at the full life cycle cost of owning and operating the aircraft.