The manager of an oil company is considering the purchase of a new jet so that it can fly in workers to a remote site. They can buy a new jet for $2,000,000 and will incur $200,000 in fixed costs (insurance, maintenance) and $287 per hour in variable costs (fuel, pilot). The jet will operate 1200 hours per year for 5 years and then be sold for $550,000. The salvage value will be a benefit in the year its sold. The company uses a discount rate of 6%.
a) Calculate the annual equivalent cost of the jet
B) What is the cost per hour?