1) [4 points] Cape Air provides non-stop flights between the major New England cities. Due to increasing demand from wealthy West Coast residents, they are considering adding a new non-stop route from Los Angeles to Nantucket. They anticipate flying three round trip flights per week. Each one-way trip is a total of 2,659 miles. To fly such a long distance Cape Air will need to invest in a new high-end luxury jet which seats 20 passengers. Their engineering team has estimated the following costs associated with the purchase of the plane and operation of flights from Los Angeles to Nantucket.

Plane cost = $9,999,900

Service life = 13 years

Salvage value of plane = $2,000,000 at the end of the useful life

Fuel costs = $1.34 per mile

Maintenance costs = $217,320 per year

Insurance costs = $150,000 per year

Crew costs = $242,250 per year

Catering costs = $65 per passenger per round- trip

Landing fees = $250 (for each airport)

If Cape Air plans to charge $3000 for a first class round-trip fare, how many passengers must CapeAir carry on an average flight in order to justify the purchase? Assume that the firms MARR=12%. The effects of income tax can be ignored