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The president's executive jet is not fully utilized. Youjudge that its use by other officers would increase direct operating costs by only $30,000 a yeat
The president's executive jet is not fully utilized. Youjudge that its use by other officers would increase direct operating costs by only $30,000 a yeat and would save $100000 a year in airline bille On the other hand, you belicke that with the increascd use the company will need to replace the jet at the end of three years rather than fout. A new jet costs $1.20million and (atits current low rate of use) has a life of Seven years. Assume that the company does not pay taxes. All cash flows are forecasted in real terms. The real opportunity cost of capital is 8% a. Calculate the equivalent annual cost of a new jet. (Do not round intermediote colculotions. Enter your answer in dollars not in millions. Round your answer to 2 decimal places. Enter your answer as o positive value.) b. Calculate the present value of the additional cost of replacing the jet one year earlier than under its current usane iDo not round intermediate calculotions. Enter your onswer in dollors not in millions. Round your onswer to 2 decimal ploces. Enter your answer as a positive value.) c. Calculate the present value of the savings. (Do not round intermediate calculations; Enter your answer in dollors not in millions. Round your answer to 2 decimal places.) d. Should you try to persuade the president to aliow other officers to use the ptane
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