Used by the executives and certain service personnel

Assignment Help Financial Management
Reference no: EM131056668

LMC is considering purchase of a new company which may have the need to purchase an executive aircraft used by the executives and certain service personnel. The aircraft costs $1,475,000. LMC tax accountants estimate that the value of the aircraft will be $775,035 with useful life of 6 years. The aircraft will have airfield rental fees of $1500 per month and maintenance costs of $1200 per month. The fixed operating costs have been estimated at $310.00/hours of flight time for the first year, with variable costs of 300/hour for the first year. Operating costs are estimated to increase at 5% per year. The present strategic plan shows the aircraft will be used for 320 hours per year. LMC executives established a MARR of 12%. To date, the 3 executives and 7 service staff will fly approximately 12 times per year, with the flights averaging 600 miles per trip. On average, each flight will have 4 people on board. All LMC staff must fly coach, and the average cost per seat on commercial airlines has been $375/seat for destinations between 300 and 900 miles. Should LMC purchase the airplane? Why or why not? Use AEW calculations to justify your decision.

Reference no: EM131056668

Questions Cloud

What is the expected return of asset : a. What is the expected return of each asset? b. What is the variance of each asset? c. What is the standard deviation of each asset?
Find out the firm d equity beta : The firm D wants to use the information available from its industry to determine its equity beta. Find out the firm D's equity beta. (Hint: use unlever and re-lever procedures)
Describe the possible migration of ancient peoples : Describing the possible migration of ancient peoples; The influence that trade, agriculture, and tools had on movements; and How colonial actions and colonization impacted those among whom the colonists settled.
Performs the equivalent of pthread_once() : To keep the implementation simple, you can ignore possibilities such as init() failing or being canceled when first called from a thread (i.e., it is not necessary to devise a scheme whereby, if such an event occurs, the next thread that calls one..
Used by the executives and certain service personnel : LMC is considering purchase of a new company which may have the need to purchase an executive aircraft used by the executives and certain service personnel. The aircraft costs $1,475,000. LMC tax accountants estimate that the value of the aircraft wi..
Minutes on the viewing platform : On average, 30% of the tourists only visit Level 1 and return to the ground, while 70% visit both levels. On a typical day, the average tourist visiting Level 1 spends 15 minutes on the viewing platform, while the average tourist visiting Level 2..
Write a program that uses sched_setaffinity() : If you have access to a multiprocessor system, write a program that uses sched_setaffinity() to demonstrate this effect, by forcing the processes either onto the same CPUs or onto different CPUs. (Chapter 44 describes the use of pipes.)
What is its estimated value per share : Nabor Industries is considering going public but is unsure of a fair offering price for the company. Before hiring an investment banker to assist in making the public offering, managers at Nabor have decided to make their own estimate of the firm's c..
Should portfolio be invested actively using a mixture of two : Should the portfolio be invested actively, passively or using a mixture of the two? (As part of your answer, include definitions of active and passive and examples of each.)

Reviews

Write a Review

Financial Management Questions & Answers

  Calculate book value of an asset

Reversing Rapids Co. purchases an asset for $159,660. This asset qualifies as a five-year recovery asset under MACRS. The five-year expense percentages for years 1, 2, 3, and 4 are 20.00%, 32.00%, 19.20%, and 11.52% respectively. Reversing Rapids has..

  Creative use of bankruptcy laws to gain

Donald Trump has been proud of the fact that he uses bankruptcy laws to his advantage and a few years ago United Airlines engaged in the creative use of bankruptcy laws to gain what the CEO called a ‘comparative advantage’ over other airlines. Invest..

  What is fernando bank spread

Fernardo bank has interest expense of 150 million, earning assets of 1,400 million and a net interest margin of 5.00%. The bank also has interest bearing liabilities of 1,100 million. what is Fernando Bank spread?

  Transformation of primary securities into secondary claims

What are the economic functions that financial intermediaries perform that benefit society? Be sure to explain how depository intermediaries, like banks, differ from other financial institutions such as investment banking firms or securities brokerag..

  What is the minimum bid per widget

A firm is considering bidding on a project to produce eight widgets per year for the next four years. In order to complete the project, the firm must lease facilities for $30,000 per year, purchase equipment that costs $100,000, as well as pay labour..

  Overhead cost to the patient services departments

St. Benedict's Hospital exercise: . 6.5 Now, assume that the hospital uses the step-down method for cost allocation, with salary dollars as the cost driver for General Administration, housekeeping labor hours as the cost driver for Facilities, and pa..

  What is the aftertax cash flow from sale of asset

Consider an asset that costs $378,400 and is depreciated straight-line to zero over its 13-year tax life. The asset is to be used in a 7-year project; at the end of the project, the asset can be sold for $47,300. If the relevant tax rate is 35 percen..

  Expects the cost of the boat to increase due to inflation

Ac is back from a long journey and that’s a fact, Jack. He wishes to buy a boat in five years that presently costs $150,000. He expects the cost of the boat to increase due to inflation by 3% per year for the next two years and 5% per year the follow..

  What is the sustainable growth rate

A firm has a return on equity of 16 percent, a return on assets of 11 percent, and a 30 percent dividend payout ratio. What is the sustainable growth rate?

  What will the firms new operating cycle be

Happy Enterprises currently has an operating cycle of 62 days. The firm is analyzing some operational changes, which are expected to increase the accounts receivable period by 2 days and decrease the inventory period by 5 days. The accounts payable t..

  Projects unit sales for new seven-octave voice emulation

Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1 75,000 2 88,000 3 102,000 4 97,000 5 78,000 Production of the implants will require $1,540,000 in net working capital to star..

  Currency market intervention

In expanding the research and knowledge of the ongoing relationship between the United States and China summarize currency market intervention and decide whether this is a useful tool. Explain your rationale. Cite an example of how intervention has b..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd