The table given below shows how, on average, the market value of a Boeing 737 has varied with its age and the cash flow needed in each year to provide a 12% return. (For example, if you bought a 737 for $19.83 million at the start of year 1 and sold it a year later, your total profit would be 18.06 + 4.15 – 19.83 = $2.38 million, 12% of the purchase cost.) Assume airlines write off their aircraft straight-line over 15 years to a salvage value equal to 15% of the original cost. Start of Year Market Value Cash Flow 1 19.83 18.06 16.93 2 4.15 3 3.30 15.85 15.03 4 3.11 5 2.72 6. 14.16 2.67 7 13.50 2.36 8. 12.75 2.37 9 12.19 2.09 10 11.53 2.12 11 11.05 1.86 10.46 10.05 12 1.92 13 1.67 9.51 9.15 14 1.75 15 1.50 16 8.66 1.59 a. Calculate economic depreciation, book depreciation, economic return, and book return for each year of the plane's life. (Leave no cells blank - be certain to enter "O" wherever required. Do not round intermediate calculations. Enter your answers in millions except for entage values. Round your percentage answers to 1 decimal place and other answers to 2 decimal places.) Economic Book Economic Book return Start of Year depreciation depreciation return (%) (%) 2 3 4 5 6 7 8

The table given below shows how, on average, the market value of a Boeing 737 has varied with its age and the cash flow needed in each year to provide a 12% return. (For example, if you bought a 737 for $19.83 million at the start of year 1 and sold it a year later, your total profit would be 18.06 + 4.15 – 19.83 = $2.38 million, 12% of the purchase cost.) Assume airlines write off their aircraft straight-line over 15 years to a salvage value equal to 15% of the original cost. Start of Year Market Value Cash Flow 1 19.83 18.06 16.93 2 4.15 3 3.30 15.85 15.03 4 3.11 5 2.72 6. 14.16 2.67 7 13.50 2.36 8. 12.75 2.37 9 12.19 2.09 10 11.53 2.12 11 11.05 1.86 10.46 10.05 12 1.92 13 1.67 9.51 9.15 14 1.75 15 1.50 16 8.66 1.59 a. Calculate economic depreciation, book depreciation, economic return, and book return for each year of the plane's life. (Leave no cells blank - be certain to enter "O" wherever required. Do not round intermediate calculations. Enter your answers in millions except for entage values. Round your percentage answers to 1 decimal place and other answers to 2 decimal places.) Economic Book Economic Book return Start of Year depreciation depreciation return (%) (%) 2 3 4 5 6 7 8

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter1: Introduction And Goals Of The Firm

Section: Chapter Questions

Problem 2.2CE

See similar textbooks

Similar questions

let's say you have a project that has an initial investment of $3 million and annual after-tax cash flows of $1 million for 5 years. at the end of the project, you can sell the project for a profit but your net after tax proceeds are actually negative $1.066 million due to environmental clean-up costs. what is the irr? round to nearest percentage then no decimal places and use the % symbol.....8% would be the form of a correct answer.
3 Your company plans to raise price on product A by 5% per year. Due to competition, sales volume from product A is expected to decline at 10% per year. Revenue will be $5M for this year. Alternatively, based on the projection from the marketing department, you may reduce the sales volume decline from 10% to 5% if the price is kept unchanged. The product will be discontinued at the end of year 5 for both scenarios. If the firm's TVOM is 10%, Determine the revenue cash flow streams for both alternatives. What is the Excel financial function to compute PW of the revenue streams
If the profit function for selling smart phone screen magnifier is -4500p2 + 561500p – 11898000, what selling price should Pineapple Store use to maximize profits? $62.39 $264.40 $32.95 $7.37
22. An architect produces a certain construction material at a labor cost of P 16.20 per piece, material cost of P 38.50 per piece and variable cost of P 7.40 per piece. The fixed charges on the business is P 100,000.00 a month. If he sells the finished product at P 95.00 each, how many pieces must be manufactured in each month to break even?
A business invests $5000 and initially plans to achieve annual revenue of $1100/yr with $200/yr expenses (starting at the end of ar 1) for ten years. No market value if used for ten years. 1.If at the end of the sixth year, instead, the investment is sold for $1000, calculate the PW, FW and AW for a BTCF MARR of 12%. Is the investment a good one if used this way? Why?
Q5) A firm is planning to manufacture a new product. The sales department estimates that the quantity that can be sold depends on the selling price. As the selling price is increased, the quantity that can be sold decreases. Numerically they estimate: P = $35.00 - 0.02Q where P =selling price per unit Q = quantity sold per year On the other hand, the management estimates that the average cost of manufacturing and selling the product will decrease as the quantity sold increases. They estimate C = $4.00Q + $8000 where C = cost to produce and sell Q per year The firm's management wishes to produce and sell the product at the rate that will maximize profit, that is, where income minus cost will be a maximum. What quantity should the decision makers plan to produce and sell each year?
Engineering Economics 00011 Please provide a step by step solution using ROR
Determine the breakeven resale price 15 years from now of an apartment house that can be bought today for $250,000. Its annual net income is $22,000. The owner wants a 10% annual return on her investment.
Your firm has discovered a cheap and efficient technology of turning used plasticbottles and bags into various products. You limit your attention to the following twoproduction opportunities: you can produce plastic utensils or helmets forBoilermakers' fans. In the first case your estimated annual revenue is K25,000, whilethe production will cost you K8,000. However, in your second option, you expect tosell 2000 helmets every year at K10 each, and the average total cost of every helmetwill be K2.a. Which production opportunity will you choose and why? b. If you do so, what will be your economic profit if your answer is lower explain technically why it is so?
You need to determine whether a project is profitable or not in a long run. Based on the data given, which of theseprojects will be profitable according to engineering economy methods?a. θ = 3 yrs., Net Value: 0b. Accumulated (without interest) net values of the revenues, expenses and investments after 5 years is +300.c. Accumulated (without interest) net values of the revenues, expenses and investments after 4 years is +100.d. θ = 6 yrs., Net Value: +400
Moriarty started living in his own condominium after turning 25 years old. When he turned 26, he became fond of buying a pack of Gardenia wheat bread every Saturday at 5:30PM. The price of the bread is Php85.00 per pack. Assume the following: 1. Moriarty will live until 95 years old. 2. The price of the bread will remain constant, 3. Moriarty’s purchasing habits will not change. What is the lifetime value that can be generated from Moriarty as a customer of Gardenia wheat bread?
The table below contains the average returns, standard deviation of returns and correlation of returns with US indexfor different countries. All data are in US dollar terms. The US T-Bill rate is 3%. Determine which of thesecountries are suitable for a US based investor to diversifv into. Show the necessarv calculations US T-Bill Rate %3