Plymouth and Brockton Bus Lines (P&B) is a regional bus transportation company that operates in Eastem Massachusetts, New Hampshire, Maine, and Rhode Island. The company is in the process of choosing between two bus models for its new dedicated hourly service between Boston Logan International Airport and Manchester-Boston Regional Airport. One model, the OR-5000, is more expensive to purchase and maintain but will have a longer operational life than the other model, the SNS-2000. P&B's discount rate is 11.1%. The company plans to continue with one of the two models for the foreseeable future. Based on the purchase and operational costs of each model sbown below, which model should it choose? (Note: dollar amounts are in thousands) Model Year 0 Year 2 -$3.8 -%$42.1 Year 1 Year 3 -$3.8 - $2.1 Year 4 Year 5 Year 6 Year 7 OR-5000 SNS-2000 -%24202 -$102 -$3.8 -$2.1 - $3.8 -$2.1 -$3.8 - $3.8 -$3.8 Part A) Based on the costs of each model, which should it choose? (Select the best choice below.) O A. P&B should choose OR-5000 because the equivalent annual annuity of its costs is smaller. O B. P&B should choose the OR-5000 because it lasts longer. O C. P&B should choose the SNS-2000 because the equivalent annual annuity of its costs is smaller. O R. P&B should choose the SNS-2000 because the NPV of its costs is smaller.
Plymouth and Brockton Bus Lines (P&B) is a regional bus transportation company that operates in Eastem Massachusetts, New Hampshire, Maine, and Rhode Island. The company is in the process of choosing between two bus models for its new dedicated hourly service between Boston Logan International Airport and Manchester-Boston Regional Airport. One model, the OR-5000, is more expensive to purchase and maintain but will have a longer operational life than the other model, the SNS-2000. P&B's discount rate is 11.1%. The company plans to continue with one of the two models for the foreseeable future. Based on the purchase and operational costs of each model sbown below, which model should it choose? (Note: dollar amounts are in thousands) Model Year 0 Year 2 -$3.8 -%$42.1 Year 1 Year 3 -$3.8 - $2.1 Year 4 Year 5 Year 6 Year 7 OR-5000 SNS-2000 -%24202 -$102 -$3.8 -$2.1 - $3.8 -$2.1 -$3.8 - $3.8 -$3.8 Part A) Based on the costs of each model, which should it choose? (Select the best choice below.) O A. P&B should choose OR-5000 because the equivalent annual annuity of its costs is smaller. O B. P&B should choose the OR-5000 because it lasts longer. O C. P&B should choose the SNS-2000 because the equivalent annual annuity of its costs is smaller. O R. P&B should choose the SNS-2000 because the NPV of its costs is smaller.
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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Transcribed Image Text:Plymouth and Brockton Bus Lines (P&B) is a regional bus transportation company that operates in Eastern Massachusetts, New Hampshire, Maine, and Rhode Island.
The company is in the process of choosing between two bus models for its new dedicated hourly service between Boston Logan International Airport and Manchester-Boston Regional Airport. One model, the OR-5000, is more expensive to
purchase and maintain but will have a longer operational life than the other model, the SNS-2000. P&B's discount rate is 11.1%. The company plans to continue with one of the two models for the foreseeable future.
Based on the purchase and operational costs of each model sbown below, which model should it choose?
(Note: dollar amounts are in thousands)
Model
Year 0
Year 1
Year 2
Year 3
-$3.8
- $2.1
Year 4
Year 5
Year 6
Year 7
OR-5000
- $202
- $102
-%243.8
- $2.1
- $3.8
- $2.1
-$3.8
- $2.1
-$3.8
- $3.8
- $3.8
SNS-2000
Part A) Based on the costs of each model, which should it choose? (Select the best choice below.)
O A. P&B should choose OR-5000 because the equivalent annual annuity of its costs is smaller.
O B. P&B should choose the OR-5000 because it lasts longer.
O C. P&B should choose the SNS-2000 because the equivalent annual annuity of its costs is smaller.
O D. P&B should choose the SNS-2000 because the NPV of its costs is smaller.
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