Question

AIR National's capacity is 120 passengers per flight. It currently carries 78 passengers per flight. Growth in passengers is expected to be 5 percent annually. New planes will have to be ordered when the company is carrying 90 percent of capacity. How long will it be before the firm must order new planes? Use Appendix A to answer the question. Round your answer to the nearest whole number.

______ years

Appendix A

$Appendix_A.jpg$

Answer 1

Let the number it will take to reach 90% capacity I.e. 108 passengers be x

78*FUTURE VALUE FACTOR = 108

78*FVF(5%, x years) = 108

FVF(5, x years) = 1.3846

Using table , x = 7 years

Hence, the planes will have to be ordered after 7 years