You are the manager of a pharmaceutical company and are considering what type of laptop computers to buy for your salespeople to take with them on their calls. ¨• You can buy fairly inexpensive (and less powerful) older machines for about $2,000 each. These machines will be obsolete in three years and are expected to have an annual maintenance cost of $150. ¨• You can buy newer and more powerful laptops for about $4,000 each. These machines will last five years and are expected to have an annual maintenance cost of $50. ¨If your cost of capital is 12%, which option would you pick and why?
You are the manager of a pharmaceutical company and are considering what type of laptop computers to buy for your salespeople to take with them on their calls. ¨• You can buy fairly inexpensive (and less powerful) older machines for about $2,000 each. These machines will be obsolete in three years and are expected to have an annual maintenance cost of $150. ¨• You can buy newer and more powerful laptops for about $4,000 each. These machines will last five years and are expected to have an annual maintenance cost of $50. ¨If your cost of capital is 12%, which option would you pick and why?
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
Related questions
Question
You are the manager of a pharmaceutical company and are considering what type of laptop computers to buy for your salespeople to take with them on their calls.
¨• You can buy fairly inexpensive (and less powerful) older machines for about $2,000 each. These machines will be obsolete in three years and are expected to have an annual maintenance cost of $150.
¨• You can buy newer and more powerful laptops for about $4,000 each. These machines will last five years and are expected to have an annual maintenance cost of $50.
¨If your cost of capital is 12%, which option would you pick and why?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education