3) Emirates is considering buying VLJs (or Very Light Jets) that are one-pilot,

Question

3) Emirates is considering buying VLJs (or Very Light Jets) that are one-pilot, two-engine jets that weigh 10,000lbs or less, and have only 5 or 6 passenger seats. Since these VLJs cost half the price of a typical business jet, they are considered to be the future o business aviation. Emirates purchased 10 VLJs so that it can begin VIP flight services within the Gulf. Emirates expects revenue of AED 1,000,000 in year 1, in year is 10% per year, what is the future worth of the revenue at year 57(12 marks) AED 1,200,000 , and amounts increasing by AED 200,000 per year till year 5. If the interest rate

Explanation / Answer

Future worth of Cash flow at the end of Year   K=(Cash Flow)*((1+i) ^(K-n)) i= interest rate per year=10%=0.1 K= The year at which Future worth is required=5 n=Year of cash flow n A B=A*(1.1^(5-n)) Year of Cash Flow Cash flow(AED) Future worth of Cash flow(AED) 1                 1,000,000                          1,464,100 2                 1,200,000                          1,597,200 3                 1,400,000                          1,694,000 4                 1,600,000                          1,760,000 5                 1,800,000                          1,800,000 SUM                          8,315,300 Future Worth of revenue at Year 5                 8,315,300 AED

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