Fidelity Life Insurance has a document imaging system that needs replacement. A local salesperson quoted a cost of $12,000 with an estimated salvage of $800 after 5 or more years. If the system is expected to save $2000 per year in clerical time, find the payback time at 10% per year. As a practice, the office manager purchases equipment only when the payback is less than 8 years. Otherwise, he prefers to lease.

Fidelity Life Insurance has a document imaging system that needs replacement. A local salesperson quoted a cost of $12,000 with an estimated salvage of $800 after 5 or more years. If the system is expected to save $2000 per year in clerical time, find the payback time at 10% per year. As a practice, the office manager purchases equipment only when the payback is less than 8 years. Otherwise, he prefers to lease.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 10P

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