题目
题目

FINS2615-Intermediate Business Finance - T2 2025

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Question textUtopia Tours is choosing between two bus models. One is more expensive to purchase and maintain but lasts much longer than the other. Its discount rate is 11%. It plans to continue with one of the two models for the foreseeable future. The costs of each model are detailed below:Model Descriptions: - **Old Reliable**: Initial cost of $200k, followed by $4k annually in maintenance, lasting **7 years**. - **Short and Sweet**: Initial cost of $100k, followed by $2k annually in maintenance, lasting **4 years**. a. What is the EAA (Equivalent Annual Annuity) of Old Reliable? (Enter to the nearest dollar) Answer 1 Question 1[input] b. What is the EAA of Short and Sweet? (Enter to the nearest dollar) Answer 2 Question 1[input]c. Which bus should you choose? Answer 3 Question 1[input]

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Here is the question and the data being used for analysis: - Two bus models with different upfront costs and annual maintenance, evaluated at a discount rate of 11%. - Old Reliable: initial cost 200,000; annual maintenance 4,000; life 7 years. - Short and Sweet: initial cost 100,000; annual maintenance 2,000; life 4 years. - We’re asked for: (a) the Equivalent Annual Annuity (EAA) of Old Reliable, (b) the EAA of Short and Sweet, and (c) which bus to choose, given the long-run plan. Step-by-step evaluation of the proposed numeric options: - Option A (42589) as the EAA of Old Rel......Login to view full explanation

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