Suzy B. is a pilot retiring from American Airlines and wants to open a charter flight business in the Caribbean.

Suzy B. is a pilot retiring from American Airlines and wants to open a charter flight business in the Caribbean. The Cessna Caravan plane she wants to purchase is $250,000 and will require $15,000 of cabin modifications. She will need working capital of $40,000 to open the business. She expects revenues of $95,000 per year and expenses of $35,000 per year and wants to sell out and retire for good in five years. Given how the Caravan historically retains its value, she expects it will still be worth $190,000 when she retires. The plane will be depreciated straight-line to a zero salvage value over 10 years, based on current tax laws. The firm´s marginal rate is 30% and the required rate of return is 11%

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