An on-line commercial directory service must decide between composing the ads for its clients in-house or paying a production company to compose them. To develop the ads in-house, the company will have to purchase computers, printers, and a database management system at an estimated cost of $46,500. This equipment will have a useful life of 3 years, after which it will be sold for $2,300. The employee who creates the ads will be paid $69,000 per year. In addition, each ad will have an average cost of $13. Alternatively, the company can outsource development at a flat fee of $21 per ad. At an interest rate of 8% per year, how many ads must the company sell each year for the options to just break even? The number of ads the company must sell for the options to just break even is determined to be
An on-line commercial directory service must decide between composing the ads for its clients in-house or paying a production company to compose them. To develop the ads in-house, the company will have to purchase computers, printers, and a database management system at an estimated cost of $46,500. This equipment will have a useful life of 3 years, after which it will be sold for $2,300. The employee who creates the ads will be paid $69,000 per year. In addition, each ad will have an average cost of $13. Alternatively, the company can outsource development at a flat fee of $21 per ad. At an interest rate of 8% per year, how many ads must the company sell each year for the options to just break even? The number of ads the company must sell for the options to just break even is determined to be
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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