Airplane Recovery Parts and Service

Finance 3000

Jonathan Romines

and Jonathan Meredith

The Aviation Industry

• Multi-billion Dollar Industry

• Small Profit Margins

• Heavily Dependent Upon Operation Of Aircraft

• Importance Of Time

• Broken Aircraft

Services Provided By Aircraft Recovery Parts and Service

• Locate Parts Which Are Needed

• Delivery Of Parts Within 24 Hours

• Guarantee Parts From Defect

Current Operation

• Operate out of Memphis

• Use FedEx Overnight service on many deliveries

• Use our own aircraft to pick-up and deliver many parts

Our Problem

• Competition in Texas

• Lost Accounts

• Now Dependent On Accounts In Illinois

Our Solutions

Project A

Purchase new Aircraft to provide better service to our accounts

Initial investment of $1,000,000 plus $50,000 for modifications

Project B

Open a new warehouse in Illinois to increase our service area

Initial investment of $10,000,000 for parts plus $50,000 for lease (10 yrs.)

Weighted Average Cost of Capital

WACC = WD KD + WCS KCS

WACC to $5 Million = 6.50 %

Where… WD = 0.5 WCS = 0.5

KD = 5 % KCS = 8 %

WACC to $10 Million = 7.66%

Where… WD = 0.33 WCS = 0.67 KD = 10 % KCS = 6.5 %

Net Present Value and Internal Rate of Return Calculations

Project A Project BYear 0 (1,050,000) (10,050,000)Year 1 178,500 1,750,000Year 2 178,500 1,750,000Year 3 178,500 1,750,000Year 4 178,500 1,750,000Year 5 198,500 1,750,000Year 6 198,500 1,750,000Year 7 198,500 1,750,000Year 8 198,500 2,000,000Year 9 218,500 2,000,000Year 10 218,500 2,000,000

Net Present Value $192,058.05 665,337.94

Internal Rate of Return 18.29% 6.62%