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Shao Airlines is considering the purchase of two alternative planes. Plane A has an...

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Question

Accounting

Shao Airlines is considering the purchase of two alternative planes. Plane
A has an expected life of 5 years, will cost $100 million, and will produce
net cash flows of $28 million per year. Plane B has a life of 10 years, will
cost $132 million, and will produce net cash flows of $27 million per year.
Shao plans to serve the route for only 10 years. Inflation in operating
costs, airplane costs, and fares are expected to be zero, and the
company's cost of capital is 9%. By how much would the value of the
company increase if it accepted the better project (plane)? Do not round
intermediate calculations. Enter your answer in millions. For example, an
answer of $1.234 million should be entered as 1.234, not 1,234,000.
Round your answer to three decimal places.
$
million
What is the equivalent annual annuity for each plane? Do not round
intermediate calculations. Enter your answers in millions. For example, an
answer of $1.234 million should be entered as 1.234, not 1,234,000.
Round your answers to three decimal places.
Plane A: $
million
Plane B: $
million
image

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