What is the advice to the young entrepreneur

Reference no: EM135837

Q. A young entrepreneur is considering buying or leasing a Xerox machine for a photocopying business office. The cost of the Xerox machine is $24,000.the annual maintenance cost is $750. The likely annual revenue from photocopying is $5500. If he decides to lease the machine the annual cost is $4000 with maintenance. The Xerox machine becomes obsolete after five years. Compute the net present value for both scenarios and the profitability index for the buying scenario. What is the advice to the young entrepreneur? Suppose that funds have to be borrowed at an interest rate of 15 percent.

Reference no: EM135837

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