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  • An Airline Is Considering Two Types of Engine Systems For

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    The airline is considering two engine systems for its planes, System A for $100,000 that uses 40,000 gallons per 1,000 hours and System B for $200,000 that uses 32,000 gallons. Both have 3-year lives and 10% salvage values. Fuel costs $2.10 per gallon and increases 6% annually. The equivalent operating cost per hour for each should be calculated to determine the better option.

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    An Airline is Considering Two Types of Engine Systems For

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    The airline is considering two engine systems for its planes, System A for $100,000 that uses 40,000 gallons per 1,000 hours and System B for $200,000 that uses 32,000 gallons. Both have 3-year lives and 10% salvage values. Fuel costs $2.10 per gallon and increases 6% annually. The equivalent operating cost per hour for each should be calculated to determine the better option.

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    33 views1 page

    An Airline Is Considering Two Types of Engine Systems For

    Uploaded by

    Freelance Worker
    The airline is considering two engine systems for its planes, System A for $100,000 that uses 40,000 gallons per 1,000 hours and System B for $200,000 that uses 32,000 gallons. Both have 3-year lives and 10% salvage values. Fuel costs $2.10 per gallon and increases 6% annually. The equivalent operating cost per hour for each should be calculated to determine the better option.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
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    An airline is considering two types of engine systems for

    #4822
    An airline is considering two types of engine systems for use in its planes. Each has the same
    life and the same maintenance and repair record.• System A costs $ 100,000 and uses 40,000
    gallons per 1,000 hours of operation at the average load encountered in passenger service.•
    System B costs $200,000 and uses 32,000 gallons per 1,000 hours of operation at the same
    level.Both engine systems have three-year lives before any major overhaul is required. On the
    basis of the initial investment, the systems have 10% salvage values. If jet fuel currently costs
    $2.10 a gallon and fuel consumption is expected to increase at the rate of 6% per year because
    of degrading engine efficiency, which engine system should the firm install? Assume 2,000
    hours of operation per year and an MARR of 10%. Use the AE criterion. What is the equivalent
    operating cost per hour for each engine?View Solution:
    An airline is considering two types of engine systems for

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