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plz reply fast Read the details given below to answer the question 9 and 10 (Marks 2,5x2 = 5) The Metro Bus service of Multan
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Read the details given below to answer the question 9 and 10 (Marks 2,5x2 = 5) The Metro Bus service of Multan must replace a number of its old busses with new ones. It has received two bids and has evaluated closely the performance characteristics of the various busses. The Volvo Buses, which costs $125,000, is top-of-the-line equipment. The Bus has a life of 12 years, assuming that the engine is rebuilt in the qu year. Maintenance costs of $3,000 a year are expected in the first 8 years, followed by total maintenance and rebuilding costs of $14,000 in the year. During the last 3 years, maintenance costs are expected to be $5,000 a year. At the end of 12 years the bus will have an estimated scrap value of $19,000. A bid from Daewoo Buses, is for $75,000 a Bus. Maintenance costs for the Bus will be higher. In the first year they are expected to be $5,000, and this amount is expected to increase by $2,500 a year through the 12 year. In the 8 year the engine will need to be rebuilt, and this will cost the company $35,000 in addition to maintenance costs in that year. At the end of 12 years the Daewoo Buss will have an estimated scrap value of $15,000. 4.If the Metro Bus service of Multan's opportunity cost of funds is 9 percent, which bid should it accept? Ignore tax considerations, 10.If its opportunity cost were 15 percent, would your answer changeStep by Step Solution
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