Question
Hampson Industries was selected by Eclipse Aviation to build the tail section of the company's new corporate jet, a six seater that will cost roughly
Hampson Industries was selected by Eclipse Aviation to build the tail section of the company's 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.
1.
Maintenance costs for a small bridge with an expected 50-years life are estimated to be $1,000 each year for the first 5 years, followed by a $10,000 expenditure in the year 15 and a $10,000 expenditure in the year 20. If i = 10% per year, what is the equivalent uniform annual cost over the entire 50-year period?
2.
Suppose that annual income from a rental property is expected to start at $1,300 per year and decrease at a uniform amount of $50 each year afterthe first year for the 15-year expectedlife of the property. The investment cost is $8,000, and i is 9% per year. Is this a good investment? Assume that the investment occurs at time zero(now) and that the annual income is first received at EOY one.
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