Dublinpilot:
A) £8000
B) £10000
Stop thinking of the engine fund as an asset (it isn't, unlike EA's paid for hangarage, which is), and more like IO540's explanantion of hedged funds to cover a liability.
CM,
I'm not sure if you've missunderstood my proposition, or if you fundamently disagree. I possed the financial question, because I think we all actually agreed on the figures, but just arrived at them in a different fashion. So I'm actually a little surprised that you have come up with different figures.
When I said
On the open market, the aircraft would sell whole (no engine fund, just a straight sale) for £50,000.
I meant the aircraft, in it's present condition, with only 1000 hours left on it's engine.
To me, I'd value it as follows:
A) £10,000. The reasoning being, I could buy all five shares, and sell the aircraft for £50,000 and have made neither a profit nor a loss (ignoring sale and purchase costs).
B) £12,000. The reasoning being, I could buy all five shares, and sell the aircraft for £50,000, and pocket the £10,000 in the engine fund, and as a result have made neither a profit nor a loss.
I don't agree that there is a liability. An aircraft without an engine is still an asset with its own value. An owner could always sell the aircraft without an engine....no liability...just an asset. That is why airlines usually value aircraft not as a whole, but in sub-divided units, such as airframe, and engines......sometimes the divided them up into much smaller assets. There will be a seperate depreciation policy on each type of asset.
Everyone arguing their corner and repeating the same things each time - this is right up my street!!!
It's also right up my street Kirstey
An aeroplane isn't worth more because it has a fund, it's worth LESS because it DOESN'T.
I'll agree with you that a share is one asset, but I can't agree that an aircraft and a fund is a single asset. They are two very seperate assets, and neither is dependent on the other. Each should be valued seperately before attempting to value the whole
dp