Utopia 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

11.2%. 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	$201	$4.1	$4.1	$4.1	$4.1	$4.1	$4.1	$4.1
Short and Sweet	$99	$2.1	$2.1	$2.1	$2.1

Question content area bottom

Part 1

Based on the costs of each model, which should it choose?(Select the best choice below.)

A.

Utopia Tours should choose Short and Sweet because the equivalent annual annuity of its costs is smaller.

B.

Utopia Tours should choose Old Reliable because the equivalent annual annuity of its costs is smaller.

C.

Utopia Tours should choose Short and Sweet because the NPV of its costs is smaller.

D.

Utopia Tours should choose Old Reliable because it lasts longer.