Net Present Value, Uncertainty The aircraft will cost $$120,000,000$ and has an expected life of $20$ years. The company requires a $12\%$ return. Assume there are no income taxes. Assume $365$ days in a year.

Required:

Calculate the NPV for the aircraft. Round to the nearest dollar.

$

Should the company buy it$?$

In discussing the proposal, the marketing manager for the airline believes that the assumption of $100\%$ booking is unrealistic. He believes that the booking rate will be somewhere

between $70\%$ and $90\%,$ with the most likely rate being $80\%.$ Recalculate the NPV by using an $80\%$ seating capacity. Round to the nearest dollar.

$

Should the aircraft be purchased?

Calculate the average seating rate that would be needed so that NPV will equal zero. Round your final answer to the nearest percent. Round intermediate calculations to

the nearest whole number. Seats to be sold needs to be rounded up$.$

$\%$

Conceptual Connection: Suppose that the price per passenger could be increased by $10\%$ without any effect on demand. What is the average seating rate now needed to achieve

an NPV equal to zero? Round your final answer to the nearest percent. Round intermediate calculations to the nearest whole number. Seats to be sold needs to be

rounded up$.$

For discount factors use Exhibit $12$B$-1$ and Exhibit $12$B$-2.$

Ondi Airlines is interested in acquiring a new aircraft to service a new route. The route will be from Tulsa to Denver. The aircraft will fly one round$-$trip daily except for scheduled

maintenance days. There are $15$ maintenance days scheduled each year. The seating capacity of the aircraft is $150.$ Flights are expected to be fully booked. The average revenue per

passenger per flight $($one$-$way$)$ is $$235.$ Annual operating costs of the aircraft follow:

The aircraft will cost $$120,000,000$ and has an expected life of $20$ years. The company requires a $12\%$ return. Assume there are no income taxes. Assume $365$ days in a year.