You are considering whether you should replace all of the copiers in your building or out-source your copying needs. You estimate that it will cost $ 25 million to replace all the copiers and that your annual maintenance costs will be $ 1.5 million. The copiers will have an expected life of 6 years and zero salvage value. If you outsource your copying, you expect the costs to be $ 7.5 million a year forever. Which alternative will you prefer assuming a cost of capital of 10% and no taxes or depreciation).
You are considering whether you should replace all of the copiers in your building or out-source your copying needs. You estimate that it will cost $ 25 million to replace all the copiers and that your annual maintenance costs will be $ 1.5 million. The copiers will have an expected life of 6 years and zero salvage value. If you outsource your copying, you expect the costs to be $ 7.5 million a year forever. Which alternative will you prefer assuming a cost of capital of 10% and no taxes or depreciation).
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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You are considering whether you should replace all of the copiers in your building or out-source your copying needs. You estimate that it will cost $ 25 million to replace all the copiers and that your annual maintenance costs will be $ 1.5 million. The copiers will have an expected life of 6 years and zero salvage value. If you outsource your copying, you expect the costs to be $ 7.5 million a year forever.
Which alternative will you prefer assuming a cost of capital of 10% and no taxes or
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