Basics of Engineering Economy 1st Edition by Leland Blank,Anthony Tarquin

Exercise 12

The president of a medium-sized oil company wants to buy a private plane to reduce the total travel time between cities where refineries are located.The company can buy a used Lear jet now or wait for a new very light jet (VLJ) that will be available 3 years from now.The cost of the VLJ will be $.5 million, payable when the plane is delivered in 3 years.The president has asked you to determine the present worth of the plane so that he can decide whether to buy the used Lear now or wait for the VLJ.If the company's MARR is 15% per year and the inflation rate is projected to be 3% per year, what is the present worth of the VLJ with inflation considered?