Fidelity Life Insurance has a document imaging system that needs replacement. A local salesperson quoted a cost of $10,000 with an estimated salvage of $900 after 5 or more years. If the system is expected to save $1700 per year in clerical time, find the payback time at 8% per year. As a practice, the office manager purchases equipment only when the payback is less than 6 years. Otherwise, he prefers to lease. Should the imaging system be purchased or leased? waterproof the new line of scuba-wear watches. Estimates follow.

Process 1: P  $50,000; n  5 years; NCF 

$24,000 per year; no salvage value.

Process 2: P  $120,000; n  10 years;

NCF  $42,000 for year 1, decreasing by $2500 per year thereafter; no salvage value.