The Tree Top Airline (TTA) is a small feeder-freight line started with very limited capital to serve the independent petroleum operators in the arid Southwest. All of its planes are identical, although they are painted different colors. TTA has been contracting its overhaul work to Alamo Airmotive for $35,000per plane per year. TTA estimates that, by building $450,000 maintenance facility with a life of 15 years and a residual (market) value of $100,000 at the end of its life, they could handle their own overhaul at a cost of only $25,000 per plane per year. What is the minimum number of planes they must operate to make it economically feasible to build this facility? The MARR is 9% per year.
The Tree Top Airline (TTA) is a small feeder-freight line started with very limited capital to serve the independent petroleum operators in the arid Southwest. All of its planes are identical, although they are painted different colors. TTA has been contracting its overhaul work to Alamo Airmotive for $35,000per plane per year. TTA estimates that, by building $450,000 maintenance facility with a life of 15 years and a residual (market) value of $100,000 at the end of its life, they could handle their own overhaul at a cost of only $25,000 per plane per year. What is the minimum number of planes they must operate to make it economically feasible to build this facility? The MARR is 9% per year.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
