Reference no: EM131357502
Advanced Aviation Economics - Problem Set
1. An airline is considering the purchase of an Airbus A-320neo which offers improved fuel efficiency over the previous generation of narrow-body aircraft. The finance department estimates the aircraft will generate a positive net cash flow of $6 million in the first year increasing by 5% annually owing to the aircraft's fuel efficiency. The airline plans to operate the aircraft for 15 years, then selling it in year 16 for an estimated net cash price of $30 million. The airline targets a return on invested capital of 12% annually (use this rate rather than the interest rate to discount future cash flows). What is the maximum price the airline should be willing to pay for a new A-320neo? Note: This computation is easiest to perform using MS Excel. The Excel computations may be copied and pasted into MS Word.
2. Complete the following table and answer the accompanying questions. Note: This computation is best completed in MS Excel. Copy and paste the resulting table into this Word document.
Control Variable Q
|
Total Benefits B(Q)
|
Total Cost C(Q)
|
Net Benefits N(Q)
|
Marginal Benefits MB(Q)
|
Marginal Cost MC(Q)
|
Marginal Net Benefits MNB(Q)
|
100
|
1200
|
950
|
|
210
|
40
|
|
101
|
1400
|
|
|
|
50
|
|
102
|
1590
|
|
|
|
60
|
|
103
|
1770
|
|
|
|
70
|
|
104
|
1940
|
|
|
|
80
|
|
105
|
2100
|
|
|
|
90
|
|
106
|
2250
|
|
|
|
100
|
|
107
|
2390
|
|
|
|
110
|
|
108
|
2520
|
|
|
|
120
|
|
109
|
2640
|
|
|
|
130
|
|
110
|
2750
|
|
|
|
140
|
|
A. At what level of the control variable are net benefits maximized?
B. What is the relation between marginal benefit and marginal cost at this level of the control variable?
3. Approximately 90,000 students per year apply to the top MBA programs.
C. Using the concept of net present value and opportunity cost, explain when it is rational for an individual to pursue and M.B.A. degree.
D. What would you expect to happen to the number of applicants if the starting salaries of managers with an M.B.A. degree remained constant but the salaries of managers with bachelor's degrees increased by 15%? Why?
4. A small airline recently sold to a private equity group for $145 million. The airline has earned profits of $9 million last year. The new managers believe they can grow profits at 5% per year. The private equity group borrows money from wealthy individuals to invest in acquisitions. Because of the significant risk involved, lenders are promised a 12% return on their loans to the equity group. Is the purchase price of the new airline reasonable? Explain.
Major debates over macroeconomic policy
: Please read and follow the instructions I need a well written paper that flows from each paragraph to the next and is original work NO PLAGIARISM (will submit to Turnitin)
|
How to standardize paper and electronic medical forms
: Why is it important for national health information management organizations to agree on how to standardize paper and electronic medical forms?
|
Economic and sociological forces
: Analyze the economic and sociological forces that drove the market equilibrium to unsustainable heights and the shocks that brought the markets back down. What might be done to moderate the effects of these economic swings?
|
Market equilibrium to unsustainable heights
: Analyze the economic and sociological forces that drove the market equilibrium to unsustainable heights and the shocks that brought the markets back down. What might be done to moderate the effects of these economic swings?
|
At what level of control variable are net benefits maximized
: MBAA 523- At what level of the control variable are net benefits maximized? What is the relation between marginal benefit and marginal cost at this level of the control variable?
|
What was the experience like
: What was the experience like? What did you learn about yourself? How did you respond to the feedback at the time that it was given? Did you see it as constructive criticism or as an attack on your work
|
Explaining the economic impact of one reform initiative
: ECONOMICS of the Affordable Care Act, with a focus on identifying and explaining the economic impact of one reform initiative for each of the following years (2011, 2012, 2013, 2014).
|
Discuss the companys decision to distribute a dividend
: Briefly address whether the company's first month of operations was a success and discuss the companys decision to distribute a dividend.
|
What are some of the advantages of labeling foods
: You also learned about digestion and absorption. Digestion is the process by which our body breaks down the foods we eat to provide obtain its energy, essential nutrients and other chemicals that are critical for life. Understanding the digestive ..
|