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In an effort to capture the large jet market, Wright Brothers Aviation invested $19 billion developing its 1903A, which is capable of carrying 800 passengers. The plane has a list price of $240 million. In discussing the plane, Wright Brothers Aviation stated that the company would break even when 240 1903As were sold.

a. Assuming the break-even sales figure given is the accounting break-even, what is the cash flow per plane? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Round your answer to the nearest whole dollar amount, e.g., 32.)

Cash flow per plane      $

b. Wright Brothers Aviation promised its shareholders a return of 35 percent on the investment. If sales of the plane continue in perpetuity, how many planes must the company sell per year to deliver on this promise? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

Number of planes to be sold        per year

c. Suppose instead that the sales of the 1903A last for only 10 years. How many planes must Wright Brothers Aviation sell per year to deliver the same rate of return? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

Number of planes to be sold       per year

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92408618

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