Answer:
To make it feasible it will need to operate 7 or more planes.
Explanation:
450,000 maintenance facility
useful life of 15 year
salvage value of 100,000
saving cost per plane:
third party cost - own facility cost = cost savings
35,000 - 25,000 = 10,000
present value of the salvage value: (present value of a lump sum)
[tex]\frac{salvage }{(1 + rate)^{time} } = PV[/tex]
salvage $ 100,000
time 15 years
Minimum accepter rate of return: 0.12000
[tex]\frac{100000}{(1 + 0.12)^{15} } = PV[/tex]
PV 18,269.6261
present worth of the facility:
450,000- 18,268.63 = 431,731.37
Now we determinate the PMT over a 15 years period to know the cost savings per year to justify the facility:
[tex]PV \div \frac{1-(1+r)^{-time} }{rate} = C\\[/tex]
PV 431,731
time 15
rate 0.12
[tex]431731.37 \div \frac{1-(1+0.12)^{-15} }{0.12} = C\\[/tex]
C $ 63,388.630
As each plane cost savings are 10,000
63,388.62 / 10,000 = 6.39
the company will need to operate 7 or more planes.
