Suppose a company is considering buying a new copier. The new machine is less labor intensive, and would save somewhat on the wage bill. A clerical assistant, working 10 hours a week (for 50 weeks a year) would not be needed any longer. This assistant, including all benefits and other compensation costs, costs $20/hour. A.) What is the annual wage/savings? B.) Suppose that the machine would last for 5 years. It requires a maintenance agreement, which would cost $500 annually. Use a discount rate of 5%. What is the most the company should be willing to pay for it?
Suppose a company is considering buying a new copier. The new machine is less labor intensive, and would save somewhat on the wage bill. A clerical assistant, working 10 hours a week (for 50 weeks a year) would not be needed any longer. This assistant, including all benefits and other compensation costs, costs $20/hour. A.) What is the annual wage/savings? B.) Suppose that the machine would last for 5 years. It requires a maintenance agreement, which would cost $500 annually. Use a discount rate of 5%. What is the most the company should be willing to pay for it?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose a company is considering buying a new copier. The new machine is less labor intensive, and would save somewhat on the wage bill. A clerical assistant, working 10 hours a week (for 50 weeks a year) would not be needed any longer. This assistant, including all benefits and other compensation costs, costs $20/hour.
A.) What is the annual wage/savings?
B.) Suppose that the machine would last for 5 years. It requires a maintenance agreement, which would cost $500 annually. Use a discount rate of 5%. What is the most the company should be willing to pay for it?
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