Reference no: EM131657836

LMC is considering purchase of a new company, and they may have the need to purchase an "executive" style aircraft to be used by the company executives and special service personnel to better serve their customers. The aircraft costs $2, 750,000, LMC tax accountants estimate that the salvage value of the aircraft will be $975,000 with useful life of 6 years. The aircraft will have airfield rental fees of $1200 per month and maintenance costs of $1000 per month. The fived 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 1000 hours per year. The LMC executive staff established a MARR of 10%. To date, the 3 executives and 10 service staff will fly approximately 20 times per year, with the flights averaging 1200 miles per trip. On average, each flight will have 12 passengers on board. All LMC staff must fly coach, and the average cost per seat on commercial airlines has been $1200/seat for destinations about 1200 miles. You have been tasked to decide whether or not to purchase the aircraft. Use AEW calculations to tasked to decide whether or not to purchase the aircraft. Use ARW. calculations to justify your decision, Should LMC purchase the airplane? Why or why not?