Capital Investment Choosing arcraft to aquire whan espanding your businass is a critical decision in Airline. In addition to decidng on the spectic aircraft to acqire, you must aso decide on how to finance our acquistiom aing a good dacison will lead to lower epering costs, increased pro tabliay, and higher returnonequity. Aircraft purchases can be funded out of cash on hand, new debt, orequity ssuance. Each funding method has a cost, and the new asset is depreciated at a rate of 1.75% per uarter in Arine. The cost of debt iseasiest to calculate, since the long-term rate es fred at 9% in the simulation. It might not seem that there 8 cost to using cash, but you need to consider the opportunity cost of alternative investment options. The cast of equty is the mi l difficult to assess, but keep in ind that shareholders epact return o thair inzmant, and issuing stock will dilute shareholder equity n addition to purchaing aireraft, there is abo anoption to ea. Tha advantage of alease is that no capital nvestments required to acquire aincraft. Buying may be a better option if the rcraft wll be used for a long period of time 1. There are many ways to calculate the cost of equity. One fairly simple way is to consider the additional dhidend that would have bo be paid on the shares of stock that are issued to maintain ehexpected return for ali investors. What would b additional "cost" if the vidend is 1Se per share each quarter, and you isse 200,000 new shares? What is the 2. Complete the folowing table Capta Requined Cost of Capital dwef 10 per sharne STUDENT/TEAM 3. Why might you not want to use just stock to fund your capital inwestmet? What othe factors might you consider when evaluating the ivestment options? Which option from the combination of options) makes the mest semse Capital Investment Choosing arcraft to aquire whan espanding your businass is a critical decision in Airline. In addition to decidng on the spectic aircraft to acqire, you must aso decide on how to finance our acquistiom aing a good dacison will lead to lower epering costs, increased pro tabliay, and higher returnonequity. Aircraft purchases can be funded out of cash on hand, new debt, orequity ssuance. Each funding method has a cost, and the new asset is depreciated at a rate of 1.75% per uarter in Arine. The cost of debt iseasiest to calculate, since the long-term rate es fred at 9% in the simulation. It might not seem that there 8 cost to using cash, but you need to consider the opportunity cost of alternative investment options. The cast of equty is the mi l difficult to assess, but keep in ind that shareholders epact return o thair inzmant, and issuing stock will dilute shareholder equity n addition to purchaing aireraft, there is abo anoption to ea. Tha advantage of alease is that no capital nvestments required to acquire aincraft. Buying may be a better option if the rcraft wll be used for a long period of time 1. There are many ways to calculate the cost of equity. One fairly simple way is to consider the additional dhidend that would have bo be paid on the shares of stock that are issued to maintain ehexpected return for ali investors. What would b additional "cost" if the vidend is 1Se per share each quarter, and you isse 200,000 new shares? What is the 2. Complete the folowing table Capta Requined Cost of Capital dwef 10 per sharne STUDENT/TEAM 3. Why might you not want to use just stock to fund your capital inwestmet? What othe factors might you consider when evaluating the ivestment options? Which option from the combination of options) makes the mest semse