8s.7 A regional airport is considering installing a new baggage handling system. Two different vendors submitted bids on the system. The airport is to replace its current system. The cash flows that describe each baggage handling system with respect to the current system are given below. Years (n) Vendor A Vendor B Vendor B--Vendor A -$500,000 - $600,000 - $100,000 1–15 $48,170 $65,880 $17,710 IRR 5% 7% 15.73% PI (4%) 1.07 1.22 1.97 Which of the following statements is correct? a. Vendor B is preferred as its PI is higher than that of Vendor A. b. Vendor B is preferred as long as the airport's interest rate is more than 5%. c. Vendor B is preferred as long as the airport's interest rate is less than 7%. d. Vendor A is preferred if the airport's interest rate is more than 15.73%.
8s.7 A regional airport is considering installing a new baggage handling system. Two different vendors submitted bids on the system. The airport is to replace its current system. The cash flows that describe each baggage handling system with respect to the current system are given below. Years (n) Vendor A Vendor B Vendor B--Vendor A -$500,000 - $600,000 - $100,000 1–15 $48,170 $65,880 $17,710 IRR 5% 7% 15.73% PI (4%) 1.07 1.22 1.97 Which of the following statements is correct? a. Vendor B is preferred as its PI is higher than that of Vendor A. b. Vendor B is preferred as long as the airport's interest rate is more than 5%. c. Vendor B is preferred as long as the airport's interest rate is less than 7%. d. Vendor A is preferred if the airport's interest rate is more than 15.73%.
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
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Transcribed Image Text:8s.7 A regional airport is considering installing a new baggage handling system. Two different vendors submitted bids on the system. The airport is
to replace its current system. The cash flows that describe each baggage handling system with respect to the current system are given below.
Years (n)
Vendor A
Vendor B
Vendor B--Vendor A
- $500,000
- $600,000
- $100,000
1-15
$48,170
$65,880
$17,710
IRR
5%
7%
15.73%
PI (4%)
1.07
1.22
1.97
Which of the following statements is correct?
a. Vendor B is preferred as its Pl is higher than that of Vendor A.
b. Vendor B is preferred as long as the airports interest rate is more than 5%.
c. Vendor B is preferred as long as the airport's interest rate is less than 7%.
d. Vendor A is preferred if the airport's interest rate is more than 15.73%.
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