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November 29, 2014

November 29, 2014

Posted by **Anna** on Thursday, June 23, 2011 at 1:31pm.

Company needs a new copy machine. Rent costs are = 17.5 cents / each.

Number of copies = atleast 200 000. (The company agrees to buy at least that number)

Buying the unit costs 150 000 SEK. The bank wants a 6.5% interest rate and

after 5 years, the unit needs to be fully paid for.

Maintenance and operation is estimated to cost 6 cents / copy.

In both cases, the actual paper costs will be the same for both options.

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What is the total cost after 5 years, which is cheapest?

How many copies / year, before it pays to buy the machine instead of renting?

Which maximum price / copy, can you pay to the leasing company in case you want to have equal cost to lease / purchase if you copy 200,000 copies / year. (Other values are equal)

- math -
**Henry**, Friday, June 24, 2011 at 4:47pmOption #1.

Cost = (0.175+0.06)cents/copy * 200,000copies/yr * 5yrs = $235,000 = cost of renting for 5 yrs.

Option # 2.

Cost = $150,000 + $150,000*0.065*5 =

150,000 + 48,750 = $198,750 = cost of

buying for 5 yrs.

Buying is cheapest after 5 years.

N = the # of copies /yr.

C = (0.175+0.06)cts/copy * N copies *

5yrs = 198,750,

C = 1.175N = 198,750,

N = 169,149 copies/yr. before it pays to buy.

Max. price per copy = $P.

Cost=$P/copy *200,000copies/yr * 5yrs =

198,750,

1,000,000P = 198,750,

P = $0.198750 = 19.8750 Cents/copy

.

- math -
**Anna**, Sunday, June 26, 2011 at 2:44pmThank you Henry! I really appreciate your help! :) Great!

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