What is the most they can pay for the vending machines

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Reconsider the lecture example regarding Middletown Community College. The college has decided not to rent vending machines but instead to buy them. X Company will sell machines to Middletown and promises to buy them back in four years. Assume that Middletown's annual profit equation for the snack operation is $0.11(X) - $72,700, where X is the number of snack items sold. Middletown expects to sell 770,000 snack items in each of the next four years. X Company is willing to negotiate the purchase price with Middletown, but it promises to purchase the machines back in four years for $2,500. Assuming Middletown wants a 8% return on this investment, what is the most they can pay for the vending machines?

Reference no: EM132135376

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