A doctor is on contract to a medium-sized oil company to provide medical services at remotely located, widely separated refineries.The doctor is considering the purchase of a private plane to reduce the total travel time between refineries. The doctor can buy a usedLearjet 31A now for $1.700 million or wait for a new very light jet (VLJ) that will be available 3 years from now. The cost of the VLJ willbe $2.600 million, payable when the plane is delivered in 3 years. The doctor has asked you, his friend, to determine the presentworth of the VLJ so that he can decide to buy the used Learjet now or wait for the VLJ. The MARR is 14.00% per year, and the inflationrate is projected to be 3.200% per year.a) What is the present worth of the VLJ with inflation considered?b) Which plane should he buy?The present worth of the VLJ with inflation considered isHe should buy the used Learjet now ✓

Given the following data,MARR (r) = 14.00% = 0.14Inflation rate (f) = 3.2% = 0.032Now we know the…

Answered: A doctor is on contract to a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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! Required information Eight years ago, Ohio Valley Trucking purchased a large- capacity dump truck for $102,000 to provide short-haul earth-moving services. The company sold it today for $45,000. Operating and maintenance costs averaged $10,200 per year. A complete overhaul at the end of year 4 costs an extra $3600. Calculate the annual cost of the truck at i = 8% per year. The annual cost of the truck is $- per year.
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Required information Eight years ago, Ohio Valley Trucking purchased a large-capacity dump truck for $116,000 to provide short-haul earth- moving services. The company sold it today for $45,000. Operating and maintenance costs averaged $10,900 per year. A complete overhaul at the end of year 3 costs an extra $3600. Calculate the annual cost of the truck at i= 8% per year. The annual cost of the truck is $- 503,717 per year. 13

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