Congratulations, you were hired as a financial analyst for Kangaroo Airlines following your studies at the University of Technology Sydney. Kangaroo Airlines is one of the leading Australian carriers. You fought off tough competition for the job, the recruitment team selected you for your personable character, analytical mind, ability to solve problems, and experience of working well in teams. You have really impressed senior management with your finance knowledge, skills, and ability to get the job done. As a result, the Chief Financial Officer (CFO) Lebron Jordan has asked you to perform a capital budgeting analysis of the new Skyliner planes. The Skyliner planes will be the first planes capable of flying from Sydney to New York non-stop. In order to conduct your analysis, you will need to use the information below that has been provided to you by Rihanna Ronaldo-Grande from the accounting department, and Virgil Salah and Jay Lopez from the sales/marketing departments. The information provided to you is detailed in the numbered paragraphs below (figures are in AUD, unless stated otherwise). It is your job as a financial analyst to decipher which information is relevant to the capital budgeting analysis. Upon completion, you will present your analysis to the Senior Management who will approve/decline investment in the new planes.

Due to the COVID pandemic and resulting travel restrictions, if the Skyliner planes were fully booked, total sales for Year 1 are expected to total $280 million. During the second and third years of operation, it is forecasted that total sales from the three Skyliner planes will be $600 million per annum (this is assuming the planes are fully booked). After Year 3, it is forecasted that competitors like Air America and Emiritz Airways will provide similar direct routes between Sydney and New York, as a result, total sales associated with the Skyliner planes will fall by $200 million to $400 million per annum (assuming the planes are fully booked). It is anticipated that on average that the Skyliner planes will be 80% filled during the entire time they are operated.

Whilst the Skyliner planes are in operation, Kangaroo Airlines will incur lost sales on its existing routes: Sydney to Los Angeles to New York, and Sydney to San Francisco to New York. The annual lost sales on existing flights will amount to 15% of the actual annual sales earned by the Skyliner planes.

Is this included or not included in the Capital Budgeting Analysis (At start, life or end)?