Consider the following costs of an airplane of the Tedu Airlines company.ItemCostInitial cost$12,000,000Service life15 yearsSalvage value$2,000,000Crew costs per year$225,000Fuel cost per mileS1.10Landing fee$250Maintenance per year$237,500Insurance cost per year$166,000Catering per passenger trip$75The company flies three round trips from Ankara to Amsterdam per week, a distance of 2,100 miles oneway. How many round-trip passengers must be carried on average in order to justify the use of theairplane if the first-class round-trip fare is $4,500? The firm's MARR is 12%. Hint: Find annual equivalentcost.

We find the annual worth of the fixed costs excluding the costs which are annually incurred .…

mpany 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 Landing fee $1.10 $250 Maintenance per year $237,500 Insurance cost per year $166,000 Catering per passenger trip $75

mpany 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 Landing fee $1.10 $250 Maintenance per year $237,500 Insurance cost per year $166,000 Catering per passenger trip $75

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Consider the following costs of an airplane of the Tedu Airlines company.
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
S1.10
Landing fee
$250
Maintenance per year
$237,500
Insurance cost per year
$166,000
Catering per passenger trip
$75
The company flies three round trips from Ankara to Amsterdam per week, a distance of 2,100 miles one
way. How many round-trip passengers must be carried on average in order to justify the use of the
airplane if the first-class round-trip fare is $4,500? The firm's MARR is 12%. Hint: Find annual equivalent
cost.

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