Reference no: EM13734610
Singapore Airlines (SIA) is considering an expansion of its fleet. Specifically, SIA is considering the purchase of twenty new A380-800 airplanes from Airbus. Airbus has offered SIA the following options concerning the transaction:
Option 1: SIA may purchase the planes on Jan. 1, 2016, and make a payment that day of $8.1 billion. Since the average list price of an A380 airplane is $414.4 million, this purchase price represents a discount to SIA for the size of the order.
Option 2: SIA may pay $3 billion on Jan. 1, 2016, and pay $1 billion on Jan. 1 of the subsequent six years.
(a) Based solely upon present value calculations, what is the maximum effective annual interest rate at which Airbus would be willing to offer the second option to SIA?
(b) Assume that when SIA conducts a present value calculation using what it considers to be the appropriate effective annual interest rate, the first option is less costly to the company. However, Go Choon Phong, the chief executive officer of the firm, is still interested in pursuing the second option. Offer suggestions as to why the firm’s senior management might choose the option with the higher present value cost.
|
Organization and management of a health care facility
: Your duties at 21st Century Solutions Health Care Hospital require you to interface with many different professionals, including physicians, nurses, and allied professionals in various areas of health care.
|
|
Developing the project plan
: Developing the Project Plan and Determining Critical Path, Based upon the details in the WBS and the project case, determine which tasks need to be completed first and which tasks are dependent upon other tasks to be completed prior to starting.
|
|
Same interest rate
: A sum of money Q will be received 6 years from now. At 5% annual interest, the present worth of Q is $60. At the same interest rate, what would be the value of Q in 10 years?
|
|
What contributions did etruscans make to the roman republic
: What contributions did the etruscans and the early Roman monarchy make to the Roman Republic.
|
|
Based solely upon present value calculations
: Singapore Airlines (SIA) is considering an expansion of its fleet. Specifically, SIA is considering the purchase of twenty new A380-800 airplanes from Airbus. Airbus has offered SIA the following options concerning the transaction:
|
|
Describe how journalistic ethics affects marketing
: Explain how journalistic ethics affects marketing public relations professionals. Explain why building relationships with journalists is beneficial to marketers
|
|
Traffic is expected to grow at a continuous rate
: Traffic at a certain intersection is 2000 cars per day. A consultant has told the city that traffic is expected to grow at a continuous rate of 4% per year. How much traffic will be expected at the end of 5 years? : P=2k, r=4% continuous comp, n=5, F..
|
|
Two salaries have the same purchasing power
: Wilson is offered a job in Kansas City that pays $50,000 and a job in Dallas that pays $60,000. Which pair of CPIs would ensure that the two salaries have the same purchasing power?
|
|
Hospital staff for wrong drug administration-other reasons
: What special benefits should be given to the patients who have suffered due to negligence by the hospital staff for wrong drug administration and other reasons?
|