Very light jets (VLJs) are one-pilot, two-engine jets that weigh10,000 pounds or

ID: 1236970 • Letter: V

Question

Very light jets (VLJs) are one-pilot, two-engine jets that weigh10,000 pounds or less and have only five or six passengerseats. Since they cost half as much as the most inexpensivebusiness jets, they are considered to be the wave of thefuture. MidAm Charter purchased 5 planes so that it caninitiate service to small cities that have airports with shortrunways. MidAm expects revenue of $1 million in year 1, $1.2million in year 2, and amounts increasing by $200,000 per yearthereafter. If the company's MARR is 10% per year, what isthe future worth of the revenue through the end of year 5?

Explanation / Answer

Year

Annual Revenue

FV Factors at 10%

Future worth

$1,000,000

1.46410

$1,464,100.00

$1,200,000

1.33100

$1,597,200.00

$1,400,000

1.21000

$1,694,000.00

$1,600,000

1.10000

$1,760,000.00

$18,000,000

1.00000

$18,000,000.00

Future Worth of Revenue

$24,515,300.00