Your firm owns a plane that it will eventually need to replace. Suppose the plane

can be sold today, one year from now, or two years from now. Alternatively, the

plane can be used three more years and then abandoned for zere scrap value.

Whenever the current plane is sold or abandoned, it will be replaced by a new

plane that will cost $$9\mathrm{.}2$ million. This and all other numbers are in real terms. The

new plane will last $19$ years from the time of purchase and will require annual

maintenance of $$0\mathrm{.}42$ million at the end of the first $18$ years. The possible selling

prices and required maintenance for the current plane are as follows:

An appropriate discount rate is $9\mathrm{.}4\%.$ You would like to find the best date to

replace the plane and will compare the value from each possibility to the adjacent

ones. $$

Part $1$

Attempt $\frac{1}{8}$ for $10$ pts$.$

What is the EAC of the new equipment? Express this and answers for all parts of

this problem in $ millions with at least five digits after the decimal.

Part $2$

Attempt $\frac{1}{6}$ for $10$ pts$.$

Relative to selling today, how much present value is created by selling $1$ year from

now?

Part $3$

Attempt $\frac{1}{8}$ for $10$ pts$.$

Relative to selling next year, how much present value is created by selling two

years from now?

Part $4$

Relative to $,$ how much present v

Intro

Your firm owns a plane that it will eventually need to replace. Suppose the plane

can be sold today, one year from now, or two years from now. Alternatively, the

plane can be used three more years and then abandoned for zero scrap value.

Whenever the current plane is sold or abandoned, it will be replaced by a new

plane that will cost $$9\mathrm{.}2$ million. This and all other numbers are in real terms. The

new plane will last $19$ years from the time of purchase and will require annual

maintenance of $$0\mathrm{.}42$ milion at the end of the first $18$ years. The possible selling

prices and required maintenance for the current plane are as follows:

An appropriate discount rate is $9\mathrm{.}4\%.$ You would like to find the best date to

replace the plane and will compare the value from each possibility to the adjacent

ones. $$

Part $1$

What is the EAC of the new equipment? Express this and answers for all parts of

this problem in $ millions with at least five digits after the decimal.

Part $2$

Relative to selling today, how much present value is created by selling $1$ year from

now?

Part $3$

Relative to selling next year, how much present value is created by selling two

years from now?

$5+$ decimals

Part $4$

Relative to selling two years from now, how much present value is created by

selling three years from now?

Intro

Your firm owns a plane that it will eventually need to replace. Suppose the plane

can be sold today, one year from now, or two years from now. Alternatively, the

plane can be used three more years and then abandoned for zero scrap value.

Whenever the current plane is sold or abandoned, it will be replaced by a new

plane that will cost $$9\mathrm{.}2$ million. This and all other numbers are in real terms. The

new plane will last $19$ years from the time of purchase and will require annual

maintenance of $$0\mathrm{.}42$ milion at the end of the first $18$ years. The possible selling

prices and required maintenance for the current plane are as follows:

An appropriate discount rate is $9\mathrm{.}4\%.$ You would like to find the best date to

replace the plane and will compare the value from each possibility to the adjacent

ones. $$

Part $1$

What is the EAC of the new equipment? Express this and answers for all parts of

this problem in $ millions with at least five digits after the decimal.

Part $2$

Relative to selling today, how much present value is created by selling $1$ year from

now?

Part $3$

Relative to selling next year, how much present value is created by selling two

years from now?

$5+$ decimals

Part $4$

Relative to selling two years from now, how much present value is created by

selling three years from now?alue is created by

selling three years from now?