Question: 1. Gateway Tours is choosing between two bus models. One is more expensive to purchase and maintain but lasts much longer than the other. Gateway's

1. Gateway Tours is choosing between two bus models. One is

1. Gateway Tours is choosing between two bus models. One is more expensive to purchase and maintain but lasts much longer than the other. Gateway's discount rate is 10.6%. 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 Year O Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Old Reliable - $201 - $4.2 - $4.2 - $4.2 - $4.2 - $4.2 - $4.2 - $4.2 Short and Sweet - $101 - $1.9 - $1.9 - $1.9 - $1.9 1) What is the NPV of each choice? NPV of the Old Reliable = NPV of Short and Sweet = 2) What is the Equivalent Annual Annuity of each choice? Equivalent Annual Annuity of the Old Reliable = Equivalent Annual Annuity of Short and Sweet =

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