Question
The Palm Tree Caf is considering to buy a new Coffee blending machine. A relative of the manager suggests her an offer of a well-known
The Palm Tree Caf is considering to buy a new Coffee blending machine.
A relative of the manager suggests her an offer of a well-known brand:
Pricing at $300,000, it would generate an income of $90,000 annually. The offer includes the first-year maintenance service free of charge. So, the first annual maintenance service charge of $30,000 would be payable at the beginning of the second year. Its life span can last for 6 years. The salvage value would be $3,000.
Given that MARR is 10%.
To save some money, you suggest the manager to seek for third party maintenance service instead of the original manufacturer at the beginning of the second year, which charges $20,000 annually. How would this suggestion influence the managers decision?
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