Question

A corporate jet costs $1,350,000 and will incur $200,000 per year in fixed cost (maintenance, …) and $277 per hour variable cost (fuel, …). The jet will be operated 1200 hours per year for 5 years and then sold for $650,000. The jet revenues $1,000 per hour. The MARR is 15% per year.

Determine the following:

a. Capital Recovery (CR) value of the Jet
b. The Annual Worth (AW) of the Jet
c. Equivalent Uniform Annual Cost (EUAC) of the Jet

Answer 1

Given:

I=$1,350,000 SV=$650,000 Expense- Maintenance=$200,000 per year Expense- Fuel=$277 per hour

1200 hours per year for 5 years R= $1,000 per hour i= 15%

(a) Capital Recovery (CR) value of the jet

CR=IAP,i,n-SVAF, i, n

CR=$1,350,000 0.15 1.1551.155-1- $650,000 0.151.155-1

CR=$306,320.89

(b) Annual Worth (AW) of the jet

AW=R-E-CR

      ry (CR) value of the jet.
           R=($1,000 / hour ) (1200 hours)

R=$1,200,000

          E=$200,000+($277 / hour)(1200 hours)

E=$532,400

AW=$1,200,000-$532,400-$306,320.89

AW=$361,279.11

(c) Equivalent Uniform Annual Cost (EUAC) of the jet

EUAC=CR+E

EUAC=$306,320.89+ $532,400

EUAC=$838,720.89