In order to support its tourism offerings in the summer, a local authority runs an excursion boat which is need of renovation. There are two alternative offers for a new boat:

a) Using the profit comparison method, indicate which model the local authority should accept. (Interest rate 5 %)

b) When are both alternatives equal on the basis of the profit comparison method? Interpret the calculated value: At what number of users is which model boat preferable?

c) Check your result obtained in subtask b.

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Initial outlay Economic life Diverse fixed costs per year Price for a one-way ticket Model A 850,000 10 years 20,000 4.80 Model B 1,000,000 10 years 20,000 5.00 Variable costs per one-way ticket 1.00 0.90 Estimated amount of users per 70,000 people 70,000 people year