Question
Hampson Industries was selected by Eclipse Aviation to build the tail section of the companys new corporate jet, a six seater that will cost roughly
Hampson Industries was selected by Eclipse Aviation to build the tail section of the companys new corporate jet, a six seater that will cost roughly $950,000 to purchase. The company has booked orders through late 2008 and hopes to begin production in 2006. The agreement was valued at $380 million. If production begins with 10 planes in January 2006 and then increases by 10 planes each month until reaching a capacity of 100 planes per month, what is the present value (December 2005) of revenues from the first three years of aircraft sales for Hampton? Assume Hampton is paid $190,000 for each tail section and receives payment when an aircraft is sold. Assume further that cash flows are monthly, the monthly interest rate is 1.25%, and all planes produced are sold.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started