Airjet is considering increasing its amount of fuel inventory from seven days to 15 days.

a) Assuming that the cost per litre of fuel remains the same at $0.70 per litre, calculate the after-tax cost of holding 1 million litres of fuel for 15 days. Assume that the companys cost of capital is 8% and storage costs are $250 per day for 1 million litres. (1.5 marks)

b) Calculate the number of current litres in inventory. How many more litres of fuel are required for 15 days? Calculate the cost of this additional inventory. Calculate the before-tax additional storage costs incurred for the year to hold the additional inventory?