Gateway Tours is choosing between two bus​ models, one of which lasts longer than the other. ​ Gateway’s discount rate is​ 8%. It 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? For each of the two bus​ models, give the relevant cost that you would use for comparison purposes.

Essentials of Business Analytics (MindTap Course List)
2nd Edition
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Chapter15: Decision Analysis
Section: Chapter Questions
Problem 21P: In a certain state lottery, a lottery ticket costs 2. In terms of the decision to purchase or not to...
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Gateway Tours is choosing between two bus​ models, one of which lasts longer than the other. ​ Gateway’s discount rate is​ 8%. It 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? For each of the two bus​ models, give the relevant cost that you would use for comparison purposes.
​[Note: to make it easier for you to solve this​ problem, I have already calculated the EAA for one of the​ buses, as you can see. You do not need to recalculate that​ one.]
 
Model Year 0 Year 1 Year 2 Year 3 Year 4
Old Reliable 0 ​ -15 ​ -15 ​ -15 ​ -15
Short and Sweet ​ -12 ​ -12 ​ -6
 
The relevant cost for Old Reliable​ is:
 
 
A.
​-15.00
 
B.
​-49.68
 
C.
​-14.99
 
D.
​-15.01
 
E.
​-12.44
 
F.
​-15.10
 
G.
​-12.42
 
The relevant cost for Short and Sweet​ is:
 
 
A.
​-15.70
 
B.
​-28.26
 
C.
​-15.87
 
D.
​-9.12
 
E.
​-15.84
 
F.
​-8.53
 
G.
​-14.13
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