Question 3 (1 point) Eagle airlines owns and operates 3 small twin engine airplanes in a small community in eastern United States. It offers both scheduled and charter flights. It is considering expanding its fleet with a used Piper Seneca that seats 5 passengers, offered for $95K. Eagle Airlines believes it can successfully counter at $85K to $90K. An investment alternative to the fourth plane would be a fixed income instrument paying 8%. Projected financial impact of the new aircraft is calculated as follows: Total Revenue = Revenue Charters + Revenue Schedule Flights = (%charter Hours" Charter Price)+(1- %charter)*Hours*TicketPrice*Passengers *Capacity Finance Cost = (Price*%financed * Rate) TotalCost = Hours*Operating Cost+Insurance+Finance Cost Profit = Total Revenue - TotalCost The spreadsheet below contains the Base Line values for the variables in the above calculations. Perform a two- way analysis on the variables Operating costs and Capacity of Scheduled Flights and determine which investment you'd make for Operating Costs = $255 and Capacity of Scheduled Flights = 50% A D E F High 1 Base 800 2 Low 500 40% $95 Hours Flown Capacity Ticket Price 1000 60% 3 50% $100 4 $108 = (%charter" Hours Charter Price)+(1- %charter)*Hours*TicketPrice* Passengers* Capacity Finance Cost = (Price*%financed Rate) TotalCost = Hours*Operating Cost+Insurance+FinanceCost Profit = Total Revenue - TotalCost The spreadsheet below contains the Base Line values for the variables in the above calculations. Perform a two- way analysis on the variables Operating costs and Capacity of Scheduled Flights and determine which investment you'd make for Operating Costs = $255 and Capacity of Scheduled Flights = 50% B D E F Base Low High Hours Flown 500 1000 Capacity 50% 40% 60% Ticket Price $100 $95 $108 Charter Price $325 $300 $350 Charter Proportion 50% 45% 70% Operating cost $245 $230 $260 Insurance $20,000 $18,000 $25,000 Aircraft Price $87,500 $85,000 $90,000 10 Interest Rate 11.5% 10.5% 13.0% 11 Proportion Financed 40% 30% 50% 1 2 800 3 4 5 6 7 8 9 Purchase the 4th aircraft Fixed Income Instrument of 8%