A firm can buy a new printer for 2,000 payable immediately, the new printer would save the firm 2,000 the first year of operation,4,000 in the second year and 2,000 in the fifth year. The firm receives no savings from the printer the third or fourth year of it's life and will need to spend 4,000 on it in the third year due to expensive repairs. The machine is scraped at the end of five years but there is no scrap value.

As an alternative to outright purchase the firm could hire a printer paying 1,000 per year in advance for the five years.The firm would still expect to make the same costs and savings as in the hire company would meet the repair cost of year three.

If the going rate of interest is 10% using net present value, advise the firm as to which of the methods (buy or hire) should be used to obtain the printer?