NPV Analysis. Travel Services, Inc., is contemplating purchase of a number of seats on regularly scheduled airlines for resale to leisure and business customers. The company projects the following costs and revenues for each type of service:
A. Calculate the net present value for each service. Which is more desirable according to the NPV criterion?
B. Calculate the profitability index for each service. Which is more desirable according to the PI criterion?
C. Under what conditions would either or both of the services be undertaken?

Question

NPV Analysis. Travel Services, Inc., is contemplating purchase of a number of seats on regularly scheduled airlines for resale to leisure and business customers. The company projects the following costs and revenues for each type of service:
  A. Calculate the net present value for each service. Which is more desirable according to the NPV criterion?
B. Calculate the profitability index for each service. Which is more desirable according to the PI criterion?
C. Under what conditions would either or both of the services be undertaken?

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The Answer of NPV Analysis. Travel Services, Inc., is contemplating purchase of a number of seats on regularly scheduled airlines for resale to leisure and business customers. The company projects the following costs and revenues for each type of service:
  A. Calculate the net present value for each service. Which is more desirable according to the NPV criterion?
B. Calculate the profitability index for each service. Which is more desirable according to the PI criterion?
C. Under what conditions would either or both of the services be undertaken?