The world airline system is composed of the routes X and Y, each of which requires 10 aircraft. These routes can be serviced by three types of aircraft - A, B, and C. There are 7 type A aircraft available , 14 type B, and 14 type C. These aircraft are identical except for their operating costs, which are as follows:

Aircraft Type Annual Operating Cost ($ Milions)

Route X Route Y

A 1.58 1.58

B 2.58 2.08

C 4.58 3.58

The aircraft have a useful life of five years and a salvage value of $1.08 million.

the sircraft owners do not operate the aircraft themselves but rent them to the operators. Owners act competitively to maximize their rental income, and operators attempt to minimize their operating costs. Airfares are also competitively determined. Assume the cost of capital is 8%.

1.) How much would each aircraft be worth?

Aircraft A _____________

Aircraft B ______________

Aircraft C _____________

Assume the number of type A aircraft increased to 14.

2.) How much would each aircraft be worth?

Aircraft A _____________

Aircraft B ______________

Aircraft C _____________

Assume the number of type A aircraft increased to 21.

3.) How much would each aircraft be worth?

Aircraft A _____________

Aircraft B ______________

Aircraft C _____________