Business Financial Model

Answer and Build a financial model that supports your answer of each question based on the one below. 1. Eagle Airlines Case (a) Do you think Keith Russell should buy the Piper Chieftain? Why? (b) Think about the uncertainties involved when buying the aeroplane, what the major factors are that may have a severe impact on profitability, and how these factors influence profitability and the decision whether or not to buy the aeroplane. 2. Please read the Wellyntoy Products-The Dynatron Case Among the three production alternatives which suggestion would you recommend? What are the pros and cons of each suggestion?

Question 1

In accordance with the situation analysis, Keith Russell should buy the Piper Chieftain. It is because this purchase decision will enhance the operating capacity of Eagle Airlines and will provide them with the more profitable opportunity for expansion of business. The proposed plan is using similar technology and has a useful life of 5 years which can be further increased by one or two years. In addition to this, this project is providing positive net present value which ensures that profits of business will definitely maximise. Further, increasing capacity can be used for charter seats to maximise the revenue. In order to compensate the risk of loom season, the various offer can be provided to the customer to maintain sales, and in festive season charges can be increased to attain desired profits of business.

Table 1: Financial analysis of proposal

By considering the uncertainty analysis, it can be noticed that major factors that will affect the profitability of Eagle airlines are utilisation capacity, operating cost and scheduled life.