Question

Washington Air Company is considering the purchase of a helicopter for connecting services between the company's base airport and the new interoounty airport being built about 30 miles away. It is believed that the chopper will be needed only for six vears until the Rapid Transit Connection is phased in. The estimates on two types of helicopters under consideration, the Whirl 2B and the ROT 8, are given in the table below. Assumina that the Whirl 2B will be available in the future with identical costs, what is the annual cost advantage of selecting the ROT 87 (Use an interest rate of 8%,) Click the icon to view the estimates on two types of helicopters under consideration. Click the icon to view the interest factors for discrete compounding when i 8% per year The annual cost advantage of selecting the ROT 8 is $ (Round to the nearest dollar.) More Info - X 1 The Whirl 2B The ROT 8 First cost Annual maintenance Salvage value Useful life in $92,000 $104,000 S6,000 $7,500 $16,000 $29,000 3 6 years Print Done

Answer 1

fir G411 =D406-1409 C D E F G H 397 Year Whirl 2B 0 92,000 PVIF@8% Present value PVIF@8% Present value Year ROT 8 1.000 S 1.000 S 398 92,000 104,000 104,000 0.926 $ 0.857$ 0.794 $ 1 $ 2 $ 3$ 4$ 0.926 $ 0.857$ 1 S 399 5,556 6,000 7,500 6,944 2 S 400 6,000 5,144 7,500 6,430 3 $(10,000) 0.794 $ 401 (7,938) 7,500 5,954 402 0.735 $ 7,500 5,513 5 $ 6$ 0.681 $ 0.630 $ 403 Present value of costs 94,761 7,500 5,104 (21,500) 404 PVIFA(8%,3) 2.577 (13,549) 405 406 Equivalent annual cost (EUAC) $36,771 Present value of costs $ 120,397 |PVIFA(8%,6) 407 4.623 408 Equivalent annual cost (EAC) 409 $ 26,044 410 $10,727 411 Annual cost advantage of selecting ROT 8