Suppose a company is considering buying a new copier. The new machine is less labor intensive, and would save somewhat on the wage bill. A clerical assistant, working 10 hours a week (for 50 weeks a year) would not be needed any longer. This assistant, including all benefits and other compensation costs, costs $20/hour. A.) What is the annual wage/savings? B.) Suppose that the machine would last for 5 years. It requires a maintenance agreement, which would cost $500 annually. Use a discount rate of 5%. What is the most the company should be willing to pay for it?

Suppose a company is considering buying a new copier. The new machine is less labor intensive, and would save somewhat on the wage bill. A clerical assistant, working 10 hours a week (for 50 weeks a year) would not be needed any longer. This assistant, including all benefits and other compensation costs, costs $20/hour. A.) What is the annual wage/savings? B.) Suppose that the machine would last for 5 years. It requires a maintenance agreement, which would cost $500 annually. Use a discount rate of 5%. What is the most the company should be willing to pay for it?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter13: best-practice Tactics: Game Theory

Section: Chapter Questions

Problem 14E

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