planning to expand its fleet of jets to replace some old planes and to expand its routes. It has received a proposal from Boeing to purchase 112 737’s over the next 4 years. What annual net revenue must each jet produce to break even on its operating cost? The analysis should be done by finding the EUAC for the 10-year planned ownership period. SWA has a MARR of 12%, purchases the jet for $22 million,
planning to expand its fleet of jets to replace some old planes and to expand its routes. It has received a proposal from Boeing to purchase 112 737’s over the next 4 years. What annual net revenue must each jet produce to break even on its operating cost? The analysis should be done by finding the EUAC for the 10-year planned ownership period. SWA has a MARR of 12%, purchases the jet for $22 million,
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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1 Southwest Airlines (SWA) is planning to expand its fleet of jets to replace some old planes and to expand its routes. It has received a proposal from Boeing to purchase 112 737’s over the next 4 years. What annual net revenue must each jet produce to break even on its operating cost? The analysis should be done by finding the EUAC for the 10-year planned ownership period. SWA has a MARR of 12%, purchases the jet for $22 million, has operating and maintenance costs of $3.2 million the first year, increasing 8% per year, and performs a major maintenance upgrade costing $4.5M at end of Year 5. Assume the plane has a salvage value at end of Year 10 of $13 million.
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