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You need a particular piece of equipment for your production process. An equipment-leasing company has offered to lease the equipment to you for $9,600 per year if you sign a guaranteed 5-year loase (the lease is paid at the end of each year). The company would also maintain the equipment for you as part of the lease. Alternatively, you could buy and maintain the equipment yourself . The cash flows from doing so are listed below (the equipment has an economic life of 5 years). If your discount rate is 7.5%, what should you do? Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 - $39,600 - $2,100 - $2,100 - $2,100 -$2,100 -$2,100 The net present value of the leasing alternative is $. (Round to the nearest dollar) Next question Gateway Tours is choosing between two bus models. One purchase and maintain but lasts much longer than the other. Gateways discount rate is 10.9%. 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 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Old Reliable -$199 - $4.1 - $4.1 - $4.1 -$4.1 -$4.1 - $4.1 - $4.1 Short and Sweet -$99 $1.8 $1.8 - $1.8 - $1.8 Based on the costs of each model, which should it choose? (Select the best choice below.) O A. Gateway Tours should choose Old Reliable because it lasts longer. OB. Gateway Tours should choose Short and Sweet because the equivalent annual annuity of its costs is smaller. OC. Gateway Tours should choose Short and Sweet because the NPV of its costs is smaller. OD. Gateway Tours should choose Old Reliable because the equivalent annual annuity of its costs is smaller. Fabulous Fabricators needs to decide how to allocate space in its production facility this year. It is considering the following contracts: Contract NPV Use of Facility A $1.95 million 100% $0.96 million 57% $1.47 million 43% a. What are the profitability indexes of the projects? b. What should Fabulous Fabricators do? B a. What are the profitability indexes of the projects? The profitability index for contract Ais (Round to two decimal places.)