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Gateway Tours is choosing between two bus models. One is more expensive to purchase and maintain but lasts much longer than the other. Its discount rate is 11.0%. The company plans to continue with one of the two models for the foreseeable future. Based on the costs of each shown below, which should it choose? (Note: dollar amounts are in thousands.) Model Old Reliable Short and Sweet Year 01 -$200 -$100 Year 1 -$4.0 -$2.0 Year 2 -$4.0 -$2.0 Year 3 -$4.0 - $2.0 Year 4 -$4.0 -$2.0 Based on the costs of each model, which should it choose? (Select the best choice below). OA. Gateway Tours should choose Short and Sweet because the NPV of its costs is smaller. OB. Gateway Tours should choose Short and Sweet because the equivalent annual annuity of its costs is smaller OC. Gateway Tours should choose Old Reliable because the equivalent annual annuity of its costs is smaller. OD. Gateway Tours should choose Old Reliable because it lasts longer. Year 5 -$4.0 Year 6 -$4.0 Year 7 -$4.0

Gateway Tours is choosing between two bus models. One is more expensive to purchase and maintain but lasts much longer than the other. Its discount rate is 11.0%. The company plans to continue with one of the two models for the foreseeable future. Based on the costs of each shown below, which should it choose? (Note: dollar amounts are in thousands.) Model Old Reliable Short and Sweet Year 01 -$200 -$100 Year 1 -$4.0 -$2.0 Year 2 -$4.0 -$2.0 Year 3 -$4.0 - $2.0 Year 4 -$4.0 -$2.0 Based on the costs of each model, which should it choose? (Select the best choice below). OA. Gateway Tours should choose Short and Sweet because the NPV of its costs is smaller. OB. Gateway Tours should choose Short and Sweet because the equivalent annual annuity of its costs is smaller OC. Gateway Tours should choose Old Reliable because the equivalent annual annuity of its costs is smaller. OD. Gateway Tours should choose Old Reliable because it lasts longer. Year 5 -$4.0 Year 6 -$4.0 Year 7 -$4.0

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Gateway Tours is choosing between two bus models. One is more expensive to purchase and maintain but lasts much longer than the other. Its discount rate is 11.0%. The company plans to continue with one of the two models for the foreseeable future. Based on the costs of each shown below, which should it choose? (Note: dollar amounts are in thousands.) Model Old Reliable Short and Sweet Year 0 -$200 -$100 Year 1 -$4.0 -$2.0 Year 2 -$4.0 -$2.0 Year 3 -$4.0 -$2.0 Year 4 -$4.0 -$2.0 Based on the costs of each model, which should it choose? (Select the best choice below) OA. Gateway Tours should choose Short and Sweet because the NPV of its costs is smaller. OB. Gateway Tours should choose Short and Sweet because the equivalent annual annuity of its costs is smaller. OC. Gateway Tours should choose Old Reliable because the equivalent annual annuity of its costs is smaller. D. Gateway Tours should choose Old Reliable because it lasts longer. Year 5 -$4.0 Year 6 -$4.0 Year 7 -$4.0
Transcribed Image Text:Gateway Tours is choosing between two bus models. One is more expensive to purchase and maintain but lasts much longer than the other. Its discount rate is 11.0%. The company plans to continue with one of the two models for the foreseeable future. Based on the costs of each shown below, which should it choose? (Note: dollar amounts are in thousands.) Model Old Reliable Short and Sweet Year 0 -$200 -$100 Year 1 -$4.0 -$2.0 Year 2 -$4.0 -$2.0 Year 3 -$4.0 -$2.0 Year 4 -$4.0 -$2.0 Based on the costs of each model, which should it choose? (Select the best choice below) OA. Gateway Tours should choose Short and Sweet because the NPV of its costs is smaller. OB. Gateway Tours should choose Short and Sweet because the equivalent annual annuity of its costs is smaller. OC. Gateway Tours should choose Old Reliable because the equivalent annual annuity of its costs is smaller. D. Gateway Tours should choose Old Reliable because it lasts longer. Year 5 -$4.0 Year 6 -$4.0 Year 7 -$4.0
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