The Community College registrar\'s office is considering replacing some Canon co

Question

The Community College registrar's office is considering replacing some Canon copiers with faster copiers purchased from Kodak. The office's 4 Canon machines are expected to last 5 more years. They can each be sold immediately for $600; their resale value in 5 years will be zero. The total cost of the new Kodak equipment will be $111,000; the equipment will have a life of 5 years and a total disposal value at that time of $1,900. The 4 Canon operators are paid $7.90 an hour each. They work a 40-hour week and 50 weeks a year. The machines break down periodically, resulting in annual repair costs of $1,140 for each machine. Supplies cost $1,440 a year for each Canon copier. The Kodak system will require only 2 regular operators. Kodak has offered the college a maintenance contract that covers all machine breakdowns; the cost of the contract is $720 per year. Total cost for all supplies will be $290 per month. Questions 1 & 2 1. What is the annual recurring cash flow if Lansing keeps the Canon copiers? 2. What is the annual recurring cash flow if Lansing buys the Kodak copiers? Questions 3 & 4 3. Assuming a discount rate of 5%, what is the net present value if Lansing keeps the Canon copiers? 4. Assuming a discount rate of 5%, what is the net present value if Lansing buy the Kodak copiers?

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