Question
Casino Air offers flights between Los Angeles and Las Vegas. Casino Airs invested capital is $9,000,000, corresponding to the investment in the 3 planes the
Casino Air offers flights between Los Angeles and Las Vegas. Casino Airs invested capital is $9,000,000, corresponding to the investment in the 3 planes the company owns. Each of the planes can carry 60 passengers. Each plane does 6 daily trips from Los Angeles to Las Vegas and 6 from Las Vegas to Los Angeles. The price is $75 for each one-way ticket. The current load factor is 80 percent (48 seats are sold on an average flight). The annual cost of operating the service and running the business is $45,000,000 (including all costs such as labor, fuel, marketing, gate fees, landing fees, maintenance, etc.) The company operates 365 days per year. The ROIC tree for Casino Air is given here:
What is the current ROIC to 4 decimals?
What is the minimum load factor at which the company breaks even to 4 decimals?
What load factor would the company have to achieve so that it obtained a 10 percentage-point increase in the ROIC (an ROIC increasing from 10 percent to 20 percent)? [4 decimals also.]
I thought I was setting this up right but am getting different numbers each time I re-calculate, thanks!
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