Xerox's iGenX high-speed commercial printers cost $1.5 billion to develop. The machines cost $500,000 to $750,000 depending on what options the client selects. Spectrum Imaging Systems is considering the purchase of a new printer based on recent contracts it received for printing weekly magazine and mail-out advertising materials. The operating costs and revenues generated are related to a large extent to the speed and other capabilities of the copier. Spectrum is considering the four machines shown below. The company uses a 3-year planning period and a MARR of 15% per year. Determine which copier the company should acquire on the basis of an incremental rate of return analysis.
|
Copier
|
Initial Investment, $
|
Operating Cost, $ per Year
|
Annual Revenue, $ per Year
|
Salvage Value, $
|
|
iGen-1
|
-500,000
|
-350,000
|
+450,000
|
+70,000
|
|
iGen-2
|
-600,000
|
-300,000
|
+460,000
|
+85,000
|
|
iGen-3
|
-650,000
|
-275,000
|
+480,000
|
+95,000
|
|
iGen-4
|
-750,000
|
-200,000
|
+510,000
|
+120,000
|