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Kirk Flash wants to purchase a new spaceship for his interplanetary taxi company, and is considering two alternative models: The Solo costs 35 million to
Kirk Flash wants to purchase a new spaceship for his interplanetary taxi company, and is considering two alternative models: The Solo costs 35 million to purchase and will last 7 years. It will cost $4 million per year to operate, and will be worthless after 7 years. The spaceship will be depreciated using the straight-line method to zero over the ships 7-year life. . The Jayne costs 63 million to purchase and will last for 9 years. It will cost $2 million per year to operate, and will be worthless after 9 years. It will be depreciated using the straight-line method to zero over the ships 9-year life. Revenues and all other expenses per year will be the same regardless of which spaceship is selected. There are no relevant net working capital cash flows. The Interplanetary corporate tax rate is 25%. The appropriate discount rate is 11%, simple annual rate. Which ship should Flash buy? Show calculations and explain carefully
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