Reference no: EM132514459

Randall UPS is a supplier of a variety of services for small businesses. Commercial printer, scanning, and copier equipment is being considered to replace a five-year-old machine. After the initial screening of a variety of systems, two integrated systems remain as potential replacements - a new model from Konica Minolta and an updated and enhanced reconstructed model from Ricoh.

The relevant information on the two machines are as follows:

                                                             Konica Minolta                        Ricoh

Installed Price                                $24,500                           $25,500

Estimated costs                         $4,300 plus $0.015/copy                   $7,050

Estimated salvage value                       $10,500                         $12,500

Estimated useful life                              5 years                              5 years

• Randall expects to charge customers $0.06 per copy and sell 250,000 copies annually; however, they are uncertain about their service volume estimate. The $0.06 per copy they expect to charge customers and the maintenance & usage fees are not expected to change over the next five years. Randall requires a minimum pre-tax rate of return of 15% on its equipment investments.

REQUIREMENTS

Question 1: Using the NPV function in Excel determine the Net Present Value (NPV) for the Konica Minolta system for estimated volumes starting from 200,000 copies/year to 300,000 copies/year, in increments of 5,000 copies.

Question 2: Using the NPV function in Excel determine the (NPV) for the Ricoh system for estimated volumes starting from 200,000 copies/year to 300,000 copies/year, in increments of 5,000 copies.

Question 3: From your answers to the above, determine which copier you would recommend to Speedy at an annual volume of 2100,000, 240,000, & 280,000 copies

Question 4: Explain why the decision is different at different volumes.