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please show all work!! Decision Making Problem Zippo is considering replacing its executive jet. They purchased the current jet 5 years ago for $1.9 million.
please show all work!!
Decision Making Problem
Zippo is considering replacing its executive jet. They purchased the current jet 5 years ago for $1.9
million. Its expected useful life was fifteen years with a $400,000 estimated salvage value. The annual
operating costs for the jet are $800,000. The new jet that Zippo is considering costs $4 million, but is
much more efficient. Annual operating costs are $500,000. After ten years, the estimated salvage value
is $1 million. If Zippo purchases the new jet, they believe the current jet can be sold for $1 million.
Ignore taxes and time value of monev
, Identify the decision rule for above situation.
b.
What are the relevant revenue and costs in making this decision?
C.
Should Zippo purchase the new executive jet? Show all of your calculations.
d
What non-financial factors should be considered?
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