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?
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?
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