Task: In an effort to capture the large jet market, Wright Brothers Aviation invested $28 billion developing its 1903A, which is capable of carrying 800 passengers. The plane has a list price of $330 million. In discussing the plane, Wright Brothers Aviation stated that the company would break even when 330 1903As were sold.
Question1. Supposing the break even sales figure given is the cash flow break even, what is the cash flow per plane?
Question2. Wright Brother Aviation promised its shareholders a twenty five percent rate of return on the investment. When sales of the plane continue in perpetuity, how many planes should the company sell per year to deliver on this promise?
Question3. Assume instead that the sales of the 1903A last for only 10 years. How many planes should Wright Brother Aviation sell per year to deliver the same rate of return?