Question
Printing Services is considering replacing its old printer with a new one. The old printer is expected to provide year-end cash inflows of 5,000 in
Printing Services is considering replacing its old printer with a new one. The old printer is expected to provide year-end cash inflows of 5,000 in each of the next 3 years before it fails. The new printer costs a significant 20,000 to buy and will last for 4 years. However, it is much more efficient than the old printer and is expected to provide year-end annual cash inflows of 10,000 (i.e., in each year of its life).
- What is the equivalent annual cost of buying the new printer and what is this costs interpretation?
- What are the annual incremental cash flows of buying the new printer?
- Assuming a discount rate of 12%, should the firm replace the old printer now?
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1st Edition
1974565491, 978-1974565498
