Answer to Question #273928 in Civil and Environmental Engineering for Alan Enrico V Tuib

Question

A doctor is on contract to a medium-sized oil company to provide medical services at remotely located,

widely separated refineries. The doctor is considering the purchase of a private plane to reduce the

total travel time between refineries. The doctor 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 $1.9 million, payable when

the plane is delivered in 3 years. The doctor has asked you, his friend, to determine the present worth

of the VLJ so that he can decide whether to buy the used Lear now or wait for the VLJ. If the 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?

Answer 1

Both the parts with the table and steps are given below: