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Textron Aviation flight operations manager reports finding that the addition of Winglets to an existing aircraft offers fuel savings of approximately 3% of the gas bill, or 150,000 gallons of jet fuel per year (Aviation Partners, Inc., n.d.). At a cost of $1.06 per gallon (which for simplicity, we will assume to be stable), this is a significant source of cost-reduction which accrues to the end user over the useful life of an aircraft. Textron's research indicates that clients typically use a 10-year planning horizon, at most.
A. If Textron chooses to discount these savings at a rate of 15% per year of useful life, considering only a 10 year planning horizon, what is the potential cost savings to the customer over the life of this plane?
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