Jet Fuel (Continued) Murad has the opportunity to invest in a filtration system to increase the purity of the kerosene used in the jet fuel. This would enable a higher price from the buyers. Currently Murad is able to charge a 10% margin into the price using total cost + pricing (Assume your answer from Question 1 is the current price), but with this change she would be able to charge the 30% markup on the original total cost (Assume your answer from Question 1 is correct). This would take an investment of $10 million dollars for equipment lasting five years and an annual operating expense for the filters of $800,000. In addition, each litre of jet fuel needs a trace amount of stabilizer added that cost $0.50 per litre. Question: Perform an incremental analysis on switching to the filtration system assuming that the 10% margin price in exhibit 1 is the current status quo. Please examine the scenarios for barrels being $60 per barrel and $90 per barrel. Exhibit 1: \begin{tabular}{|l|l|l|l|l|l|} \hline CrudeOilPrice & DesiredMargin & DesiredMarkup & GasolinePrice & JetFuelPrice & Asphaltrice \\ \hline$60 & 10% & 10% & $72.27 & $90.34 & $108.41 \\ \hline$60 & 10% & 30% & $78.57 & $98.21 & $118.86 \\ \hline$60 & 20% & 10% & $80.45 & $100.57 & $120.68 \\ \hline$60 & 20% & 30% & $88.24 & $110.30 & $132.36 \\ \hline$80 & 10% & 10% & $96.97 & $121.21 & $145.45 \\ \hline$80 & 10% & 30% & $107.14 & $133.93 & $161.06 \\ \hline$80 & 20% & 10% & $109.09 & $136.36 & $163.64 \\ \hline$80 & 20% & 30% & $120.00 & $150.00 & $180.00 \\ \hline$90 & 10% & 10% & $108.41 & $135.52 & $162.62 \\ \hline$90 & 10% & 30% & $119.48 & $149.35 & $179.23 \\ \hline$90 & 20% & 10% & $121.21 & $151.51 & $181.82 \\ \hline$90 & 20% & 30% & $133.33 & $166.67 & $200.00 \\ \hline \end{tabular} Jet Fuel (Continued) Murad has the opportunity to invest in a filtration system to increase the purity of the kerosene used in the jet fuel. This would enable a higher price from the buyers. Currently Murad is able to charge a 10% margin into the price using total cost + pricing (Assume your answer from Question 1 is the current price), but with this change she would be able to charge the 30% markup on the original total cost (Assume your answer from Question 1 is correct). This would take an investment of $10 million dollars for equipment lasting five years and an annual operating expense for the filters of $800,000. In addition, each litre of jet fuel needs a trace amount of stabilizer added that cost $0.50 per litre. Question: Perform an incremental analysis on switching to the filtration system assuming that the 10% margin price in exhibit 1 is the current status quo. Please examine the scenarios for barrels being $60 per barrel and $90 per barrel. Exhibit 1: \begin{tabular}{|l|l|l|l|l|l|} \hline CrudeOilPrice & DesiredMargin & DesiredMarkup & GasolinePrice & JetFuelPrice & Asphaltrice \\ \hline$60 & 10% & 10% & $72.27 & $90.34 & $108.41 \\ \hline$60 & 10% & 30% & $78.57 & $98.21 & $118.86 \\ \hline$60 & 20% & 10% & $80.45 & $100.57 & $120.68 \\ \hline$60 & 20% & 30% & $88.24 & $110.30 & $132.36 \\ \hline$80 & 10% & 10% & $96.97 & $121.21 & $145.45 \\ \hline$80 & 10% & 30% & $107.14 & $133.93 & $161.06 \\ \hline$80 & 20% & 10% & $109.09 & $136.36 & $163.64 \\ \hline$80 & 20% & 30% & $120.00 & $150.00 & $180.00 \\ \hline$90 & 10% & 10% & $108.41 & $135.52 & $162.62 \\ \hline$90 & 10% & 30% & $119.48 & $149.35 & $179.23 \\ \hline$90 & 20% & 10% & $121.21 & $151.51 & $181.82 \\ \hline$90 & 20% & 30% & $133.33 & $166.67 & $200.00 \\ \hline \end{tabular}
