Question

You always need a printer-scanner-copier. You can go with an inkjet printer or a laser printer. The inkjet model costs $177 and lasts five years. Replacement ink costs $210, and you will to purchase it at the end of years 1, 2, 3, and 4. The laser model costs $430 and lasts 6 years. Black toner for the laser model costs $92 and will need to be replaced in years 2, 4, and 5. Color toner for the laser model costs $300 and will need to be replaced in years 3 and 5. Your paper cost remains the same with either option. Your opportunity cost of capital is 7% APR compounded annually.

What is the NPV of purchasing the inkjet model AND what is the NPV of the laser model?

What is the EAC of purchasing the inkjet model AND what is the EAC of the laser model?

Which type of printer should be purchased?

Answer 1

Answer (1) and (2):

NPV of purchasing the inkjet model = - $888.31

NPV of purchasing the laser model = - $1104.92

EAC of purchasing the inkjet model = - $216.65

EAC of purchasing the laser model = -231.81

Workings:

Answer 3:

Inkjet printer should be purchased. NPV in terms of cost of Inkjet printer is lesser.