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What is the estimated payback period for the new jet

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Question - You are evaluating a proposal to buy a new executive jet for your corporation. The new jet will cost £5.2 million to buy. You will need to pay for this jet as soon as you purchase it.

If you buy the new jet, you will sell the old executive jet for £3.0 million, which you will receive immediately.

If you buy the new jet, there will be immediate extra training costs totalling £200000, for air crew and ground staff, which will occur once only and will be paid immediately.

The new jet is more fuel-efficient and buying it will lead to an estimated saving of £500000 per year on fuel.

However, maintenance will be more expensive and therefore maintenance costs will be £100000 more per year than at present.

All fuel and maintenance costs must be paid for in the year in which they are incurred.

Based on the above information, what is the estimated payback period for the new jet in years?

Reference no: EM133057575

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