A computer can be purchased by a consulting engineer for$46,000. She estimates a

Question

A computer can be purchased by a consulting engineer for$46,000. She estimates a useful life for 6 years for thecomputer with a salvage value of $4000. A maintenance contractis available at a rate of $2,400 per year, and anoperator will cost $15 per hour when the computer is in use. As, analternative, a computer service is available to the engineer to doall her computing at a rate of $24 per hour. Assuming interest at8% compounded anually and insurance at 6% of book value, determinethe annual usage in hours per year for which the two alternativesare equal. If annual usage is expected to be greater than thisresult, which of the alternatives is morefavorable?

Explanation / Answer

A computer can be purchased by a consulting engineer for$46,000. She estimates a

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