The community college registrars office is considering

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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?

Reference no: EM13608123

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