Hi I have a general question if an airline is looking at leasing(wet lease) an aircraft to fly a new route would sort of calculations should I be doing to figure out of this is a good decision? assuming the average price per ticket is $1,800 and there is a potential of 150,00 passengers per annum. the aircraft has 174 seats. there is more information in the question but I just want to understand the calca I should be thinking of doing to decide on the profitability of this decision.
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Hi I have a general question
if an airline is looking at leasing(wet lease) an aircraft to fly a new route would sort of calculations should I be doing to figure out of this is a good decision?
assuming the average price per ticket is $1,800 and there is a potential of 150,00 passengers per annum.
the aircraft has 174 seats.
there is more information in the question but I just want to understand the calca I should be thinking of doing to decide on the profitability of this decision.
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- Reynolds Construction (RC) needs a piece of equipment that costs 200. RC can either lease the equipment or borrow 200 from a local bank and buy the equipment. Reynoldss balance sheet prior to the acquisition of the equipment is as follows: a. (1) What is RCs current debt ratio? (2) What would be the companys debt ratio if it purchased the equipment? (3) What would be the debt ratio if the equipment were leased and the lease not capitalized? (4) What would be the debt ratio if the equipment were leased and the lease were capitalized? Assume that the present value of the lease payments is equal to the cost of the equipment. b. Would the companys financial risk be different under the leasing and purchasing alternatives?Use the following data on Table 3 to decide should the Company lease or purchase the new production line. The PV of the costs of the purchase decision is $72,450. a. Must not lease the equipment because the cost of lease is $114,155 b. Must lease the equipment because the cost of lease is $69,756 C. Must lease the equipment because the cost of lease is $55,000 d. Must not lease the equipment because the cost of lease is $75,000 Table 3: Annual Payment* Tax rate Rental Period (years) Cost of Borrowing (before tax) Payments are due at the beginning of each year $ 25,000 40% 5 9.50%All parts are under one question and therefore can be answered in full per your policy. 4. Analysis of a replacement project At times firms will need to decide if they want to continue to use their current equipment or replace the equipment with newer equipment. The company will need to do replacement analysis to determine which option is the best financial decision for the company. Price Co. is considering replacing an existing piece of equipment. The project involves the following: • The new equipment will have a cost of $600,000, and it is eligible for 100% bonus depreciation so it will be fully depreciated at t = 0. • The old machine was purchased before the new tax law, so it is being depreciated on a straight-line basis. It has a book value of $200,000 (at year 0) and four more years of depreciation left ($50,000 per year). • The new equipment will have a salvage value of $0 at the end of the project's life (year 6). The old machine has a current salvage value (at…
- K Fabulous Fabricators needs to decide how to allocate space in its production facility this year is considering the following contra a. What are the profitability indexes of the projects? b. What should Fabulous Fabricators de? What are the profitability indexes of the projects? The profitability index for contract Ais (Round to be decimal places) Round to two decimal places) The profitablity index for contract Dis The profitability index for contract CH b. What should Fabulous Fabrators do? (Select the best choice below) OA It should take the two projects with the highest profitability indexes C and A OB. Since it has the capacity to do both Band C and NPV NPV is greater than NPV, it should do to and C OC. Since the NPV of A is the largest, it should choose A OD. Since the profitability indes for the largest, it should choose C Data table (Click on the following icon in order to copy its contents into a spread) Contract Use of Facility 100% 55% 45% C $2.02 m $105 min $1.46 milion…Radley Co. is growing its business and is currently deciding how to finance this programme. Following some research, the business decides that it can either (1) issue bonds and use the money to buy the necessary assets, or (2) lease the assets for an extended period of time. Please respond to the following questions without understanding the relative costs involved: a. What benefits might leasing the assets have over purchasing them? b. What drawbacks can leasing the assets have in comparison to buying them? c. How would leasing the assets vary from issuing bonds and buying the assets in terms of how it will impact the Statement of Financial Position?Suppose that you could invest in the following projects but have only $29,700 to invest. How would you make your decision and in which projects would you invest? Project Cost NPV A $ 7,850 $ 3,200 B 11,060 6,460 C 9,200 4,150 D 6,540 3,090 You should invest in which of the following options? A & B only B & C only B & D only A, B, & C B, C & D
- Please answer all questions and make them bold so I can understand it clearly. Problem 12-25 (Algo) Net Present Value Analysis of a Lease or Buy Decision [LO12-2] The Riteway Ad Agency provides cars for its sales staff. In the past, the company has always purchased its cars from a dealer and then sold the cars after three years of use. The company’s present fleet of cars is three years old and will be sold very shortly. To provide a replacement fleet, the company is considering two alternatives: Purchase alternative: The company can purchase the cars, as in the past, and sell the cars after three years of use. Ten cars will be needed, which can be purchased at a discounted price of $20,000 each. If this alternative is accepted, the following costs will be incurred on the fleet as a whole: Annual cost of servicing, taxes, and licensing $ 3,600 Repairs, first year $ 1,500 Repairs, second year $ 4,000 Repairs, third year $ 6,000 At the end of three years, the fleet…a. Cobre Company is considering the purchase of new equipment that will speed up the process for extracting copper. The equipment will cost $3,800,000 and have a life of 5 years with no expected salvage value. The expected cash flows associated with the project are as follows: Year Cash Revenues Cash Expenses $6,000,000 $4,800,000 6,000,000 4,800,000 3 6,000,000 4,800,000 4 6,000,000 4,800,000 6,000,000 4,800,000 b. Emily Hansen is considering investing in one of the following two projects. Either project will require an investment o $75,000. The expected cash revenues minus cash expenses for the two projects follow. Assume each project is depreciable. Year Project A Project B 1. $2,500 $22,500 2 30,000 30,000 45,000 45,000 4 75,000 22,500 75,000 22,500 c. Suppose that a project has an ARR of 30% (based on initial investment) and that the average net income of the project is $220,000. d. Suppose that a project has an ARR of 50% and that the investment is $250,000. 3.Suppose you are a panelist, and you must evaluate if the design is feasible or not. You look at the breakdown of expenses, possible revenues, etc. Here are some important chapters and discussions taken from a certain plant design. Chapter 3: Market Study This plant design, entitled “IIVSDROP: The First Ear Dropper Solution Manufacturing Plant in the Philippines” considers a 30-year period of study, starting 2021, after finishing its construction by 2020. All projections, and interest rates set by the company shall be evaluated within this 30-year period. The inflation rate shall not be included in the computation and a minimum attractive rate of return is set at 20%. Chapter 4: Products Our company produces ear dropper solution which can be sold for PHP. 125.00 per bottle. Annually, the company can produce 1000 pallets of the product. Each pallet is stacked with 14 layers and each layer consists of 8 boxes. A box contains 12 bottles of ear dropper for wholesale…
- Net Present Value Analysis of a Lease or Buy Decision The Riteway Ad Agency provides cars for its sales staff. In the past, the company has always purchased its cars from a dealer and then sold the cars after three years of use. The company’s present fleet of cars is three years old and will be sold very shortly. To provide a replacement fleet, the company is considering two alternatives: Purchase alternative: The company can purchase the cars, as in the past, and sell the cars after three years of use. Ten cars will be needed, which can be purchased at a discounted price of $17,000 each. If this alternative is accepted, the following costs will be incurred on the fleet as a whole: At the end of three years, the fleet could be sold for one-half of the original purchase price. Lease alternative: The company can lease the cars under a three-year lease contract. The lease cost would be $55,000 per year (the first payment due at the end of Year 1). As part of this lease cost, the owner…Zenith Investment Company is considering the purchase of an office property. It has done an extensive market analysis and has estimated that based on current market supply or demand relationships, rents, and its estimate of operating expenses, annual NOI will be as follows: Year NOI 1 $ 1,030,000 2 1,030,000 3 1,030,000 4 1,210,000 5 1,260,000 6 1,310,000 7 1,349,000 8 1,389,170 A market that is currently oversupplied is expected to result in cash flows remaining flat for the next three years at $1,030,000. During years 4, 5, and 6, market rents are expected to be higher. It is further expected that beginning in year 7 and every year thereafter, NOI will tend to reflect a stable, balanced market and should grow at 3 percent per year indefinitely. Zenith believes that investors should earn a 12 percent return (r) on an investment of this kind.Required: a. Assuming that the investment is expected to produce NOI in years 1 to 8 and is expected to be owned for…Suppose you work for a data processing company who needs a new supercomputer now. Your company can either buy the supercomputer for $400,000 or lease it from a computer leasing company through an operating lease. The maintenance will be provided by the leasing company. Your company will not incur any other costs except the lease payment. But the annual maintenance cost will cost the leasing company$25,000 per year for four years. The lease terms require your company to make four annual payments at the beginning of each year. The computer could be depreciated for tax purposes straight-line over four years and it will have no residual value at the end of year 4. The interest rate is 12%. Suppose the tax rate paid by your company is 21% but the leasing company pays only 15% tax due to carried over losses from their previous operation. What is the pre-tax lease payment amount that will help the leasing company break even within 4 years if it requires 8% return. What is the NPV of the…