You are considering buying a new printing press for your business. You can purchase the Heidelberg press
Question:
You are considering buying a new printing press for your business. You can purchase the Heidelberg press at an initial cost of $400,000. The Heidelberg will last 5 years. The cost of operating and maintaining the press will be $50,000 for the first three years and $60,000 for the last two years of its useful life. At the end of the fifth year you will sell the press for $40,000. You can choose to purchase an alternative printing press called Epson. The Epson press will cost you $450,000. The Epson will last 7 years. The cost of operating and maintaining the press will be $70,000 for the first three years and $80,000 for the last four years of its useful life. At the end of the seventh year you will sell the press for $50,000. The appropriate discount rate is 10%. Calculate the equivalent annual cost of each printing press. Which one should you buy?
