In United States airspace, the average number of commercial aircraft in the sky on an average morning is 4000. There are another 16,000 planes on the ground. Aerospace company Rockwell-Collins developed what it calls a “digital parachute,” a panic-button technology that will land any plane in a pinch at the closest airport, no matter what the weather or geography, and without the help of a pilot. The technology could be applied where a pilot is no longer capable of flying the plane, or is panicked and confused about what to do in an emergency. Assume the cost of retrofitting 20,000 commercial airplanes is $55,000 each and the plane stays in service for 15 years. The technology could save an estimated average of 40 lives per year; the value of a human life is estimated at $4,000,000.
Use an interest rate of 8% per year to determine the B/C ratio.
What will be an ideal response?
B = 40(4,000,000) = $160 million per year
C = 20,000(55,000)(A/P,8%,15)
= 1,100,000,000(0.11683)
= $128.513 million per year
B/C = 160/128.513
= 1.25
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