Company X has a corporate jet that is not fully utilized. You estimate that its use by
Fantastic news! We've Found the answer you've been seeking!
Question:
Company X has a corporate jet that is not fully utilized. You estimate that its use by other officers would increase direct operating costs by only $20,000 a year and would save $100,000 a year in airline bills. However, the increase in usage of the jet will make the company to replace the jet at the end of three years rather than four. A new jet (at the current low rate of use) has a life of six years, and the equivalent annual cost (EAC) of $240,000. Assume the company does not pay taxes. The cost of capital is 8%.
Calculate the NPV of allowing other officers to use the jet.
Related Book For
Principles of Corporate Finance
ISBN: 978-0072869460
7th edition
Authors: Richard A. Brealey, Stewart C. Myers
Posted Date: