If the implicit rental price of an airliner is $200,000 per year, the interest rate is 5 percent, and depreciation is $60,000 per year, then the purchase price of the airliner is

Question

Quizplus · Accepted Answer

The purchase price of the airliner can be calculated using the formula:
Purchase Price = Implicit Rental Price + Depreciation / (1 - Interest Rate)

Substituting the given values, we get:
Purchase Price = $200,000 + $60,000 / (1 - 0.05)
Purchase Price = $2,800,000

Therefore, the purchase price of the airliner is $2,800,000, which is option C.

If the Implicit Rental Price of an Airliner Is $200,000