1. A firm can buy a new printer for $2,000 payable immediately. The new printer would save the firm of $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 in the third and fourth year of its life, and will need to spend $4,000 on it in the third year due to expensive repairs. The machine is scrapped at the end of 5 years, but there is no scrap value.