Years (n) Vendor A Vendor B Vendor B- Vendor A -$500,000 -$600,000 -$100,000 1-15 ROR PI (4%) $48,170 $65,880 $17,710 5% 7% 15.73% 1.07 1.22 1.97
Years (n) Vendor A Vendor B Vendor B- Vendor A -$500,000 -$600,000 -$100,000 1-15 ROR PI (4%) $48,170 $65,880 $17,710 5% 7% 15.73% 1.07 1.22 1.97
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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Question
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.
Which of the following statements is correct?
(a) Vendor B is preferred as long as the airport's interest rate is less than or equal to 15.73%
(b) Vendor B is preferred as long as the airport's interest rate is more than 5%.
(c) Vendor Bis preferred as lo ng as the airport 's interest rate is less than 7%.
(d) Vendor A is preferred if the airport's interest rate is more than 5.73%.
Transcribed Image Text:Years (n)
Vendor A
Vendor B
Vendor B- Vendor A
-$500,000
-$600,000
-$100,000
1-15
ROR
PI (4%)
$48,170
$65,880
$17,710
5%
7%
15.73%
1.07
1.22
1.97
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