An airline is planning to make iPads available on some of its Boeing 747 air crafts with
Question:
An airline is planning to make iPads® available on some of its Boeing 747 air crafts with in-flight e-mail and Internet service on transoceanic flights. Passengers on these flights will be able to rent iPads from the airline and use them to browse webs or to send and receive e-mail no matter where they are in the skies. A nominal charge of approximately $30 will be instituted for each rental. The airline has estimated the projected cash flows (in millions of dollars) for the systems in the first 10 aircraft as follows:
Year An (Unit: Million Dollars)
2012…………………………………….-$5.0
2013……………………………………..$1.5
2014……………………………………..$5.0
2015……………………………………..$9.0
2016……………………………………$12.0
2017…………………………………....$10.0
Determine whether this project can be justified at MARR = 15%, and calculate the annual benefit (or loss) that would be generated after installation of the systems.
MARRMinimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...
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