1. P Authority is considering two manufacturers for the companys bus needs. The buses are expected to generate the same annual revenue regardless of the manufacturer. The company will depreciate the buses straight-line over 5 years and stick with the manufacturer it chooses indefinitely.

Zonda will supply the buses for $150 million. The before-tax maintenance costs are expected to be $25 million every year. P Authority will have to replace these buses every 9 years.

MAN will supply the buses for $250 million. Before-tax maintenance costs are expected to be $15 million every year. P Authority will have to replace these buses every 14 years.

P Authority uses an annual discount rate of 14% and is in 20% marginal tax bracket. Using the equivalent annual cost analysis, determine the manufacturer P Authority should choose. Please show all work .