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9.32 (LO 3) Net present value, ethics (adapted from Roland L. Madison, “Should Finance Make the Numbers ’Come Out’,” Strategic Finance, 86, no. 10 (April 2005): 17–18.) Amy Kim-bell, CPA, CMA, and a member of the Institute of Management Accountants, recently joined Magee Metals and Moldings as a senior financial analyst. One of her major responsibilities is to prepare data to support capital equipment purchases. Magee is trying to expand its international operations. The company is currently spending $275,000 each year on international travel, an amount that is expected to increase by 20% each year for the next four years and then level off. Since none of Magee’s current fleet of corporate jets has the range to fly internationally, Magee’s CFO, Tony Smith, recently asked Amy to run some numbers on the purchase of a new corporate jet with an international range. Amy determined that the jet upper managers want to buy has a purchase price of $15 million and a useful life of 15 years. Variable operating costs are an estimated $220,000 per year, based on a projected usage of 400 hours per year. Fixed operating costs are estimated at $375,000 per year, not including depreciation. When Magee employees aren’t using the company’s jets, they are rented to other parties at a rate of $3,500 per hour. Based on existing rental requests, Amy estimated that the new jet would be rented for 500 hours each year.

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