Decide whether an airline should buy option A, a Boeing 717, or option B, an Airbus A319 Assume that new 717 is purchased after 3 years and the new A319 is purchased after 10 years Option A – Boeing 717 Purchase price: $1,000,000 Scrap value at end of year 3: $100,000 Cost of capital: 10% Year 1 Year 2 Year 3 Revenue $40,000,000 $40,000,000 Ex-fuel expense $10,000,000 $10,000,000 Fuel expense $24,000,000 $24,000,000 $40,000,000 $10,000,000 $24,000,000 Option B – Airbus A319 Purchase price: $55,000,000 Sale price at end of year 10: $3,000,000 Cost of capital: 10% Year 1 Year 2 Year 3 Revenue View complete question » Decide whether an airline should buy option A, a Boeing 717, or option B, an Airbus A319 Assume that new 717 is purchased after 3 years and the new A319 is purchased after 10 years Option A – Boeing 717 Purchase price: $1,000,000 Scrap value at end of year 3: $100,000 Cost of capital: 10% Year 1 Year 2 Year 3 Revenue $40,000,000 $40,000,000 Ex-fuel expense $10,000,000 $10,000,000 Fuel expense $24,000,000 $24,000,000 $40,000,000 $10,000,000 $24,000,000 Option B – Airbus A319 Purchase price: $55,000,000 Sale price at end of year 10: $3,000,000 Cost of capital: 10% Year 1 Year 2 Year 3 Revenue $44,000,000 $44,000,000 Ex-fuel expense $10,000,000 $10,000,000 Fuel expense $20,000,000 $20,000,000 Year 4 $44,000,000 $10,000,000 $20,000,000 Please quantify the options and state which is preferable. Year 5 $44,000,000 $10,000,000 $20,000,000 Year 6 $44,000,000 $10,000,000 $20,000,000 Year 7 $44,000,000 $10,000,000 $20,000,000 Year 8 $44,000,000 $10,000,000 $20,000,000 Year 9 $44,000,000 $10,000,000 $20,000,000 Year 10 $44,000,000 $10,000,000 $20,000,000 $44,000,000 $10,000,000 $20,000,000 Document Preview: Sheet1
Purchase price: $1,000,000
Scrap value at end of year 3: $100,000
Cost of capital: 10%
Year 1
Year 2
Year 3
Revenue
Ex-fuel expense
Fuel expense
Purchase price: $55,000,000
Sale price at end of year 10: $3,000,000
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Please quantify the options and state which is preferable.
Decide whether an airline should buy option A, a Boeing 717, or option B, an Airbus A319
Option A – Boeing 717
Option B – Airbus A319
Assume that new 717 is purchased after 3 years and the new A319 is purchased after 10 years
$40,000,000.00
$40,000,000.00
$40,000,000.00
$10,000,000.00
$10,000,000.00
$10,000,000.00
$24,000,000.00
$24,000,000.00
$24,000,000.00
$44,000,000.00
$44,000,000.00
$44,000,000.00
$44,000,000.00
$44,000,000.00
$44,000,000.00
$44,000,000.00
$44,000,000.00
$44,000,000.00
$44,000,000.00
$10,000,000.00
$10,000,000.00
$10,000,000.00
$10,000,000.00
$10,000,000.00
$10,000,000.00
$10,000,000.00
$10,000,000.00
$10,000,000.00
$10,000,000.00
$20,000,000.00
$20,000,000.00
$20,000,000.00
$20,000,000.00
$20,000,000.00
$20,000,000.00
$20,000,000.00
$20,000,000.00
$20,000,000.00
$20,000,000.00
Sheet1
Purchase price: $1,000,000
Scrap value at end of year 3: $100,000
Cost of capital: 10%
Year 1
Year 2
Year 3
Revenue
Ex-fuel expense
Fuel expense
Purchase price: $55,000,000
Sale price at end of year 10: $3,000,000
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Please quantify the options and state which is preferable.
Decide whether an airline should buy option A, a Boeing 717, or option B, an Airbus A319
Option A – Boeing 717
Option B – Airbus A319
Assume that new 717 is purchased after 3 years and the new A319 is purchased after 10… Attachments:

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