Reference no: EM133906119

Question

Transport for London (TFL) has been unhappy with the overall performance of the London Tube Line, a network of North-South, East-West and Circular train lines servicing central London. The London Tube Line is the world's oldest underground transport line. Due to its very old age and other factors, London Tube Line suffers from repeated malfunctions leading to costly commuter delays. You work for a German company, XTRAN, experts in building, maintaining, and operating large modern transportation networks. In particular, XTRAN has been responsible for building and then operating a number of high-profile modern high-speed train lines built over the last 20 years. XTRAN is considered to be a world leader in modern transportation technology. TFL and the UK government have invited XTRAN to bid for the contract to repair, maintain, and operate the Northern Tube Line, which is one line amongst a number of interconnected lines that form the overall London Tube Line network. The UK government promises to pay XTRAN a fixed fee in British Pounds each year for the five year duration of the contract. Analysts for XTRAN have estimated that the fixed fee proposed by the UK government is too low, so XTRAN would make a loss.