A newspaper is considering buying locked vending machines to replace open newspaper racks in the downtown area. The vending machines cost $75 each. It is expected that the annual revenue from selling the same quantity of newpapers will increase $12 per vending machine. The useful life of the vending machine is unknown.
(A) To determine the sensitivity of the rate of return to useful life, prepare a graph for rate of return versus useful life for lives up to 10yrs.
(B) If the newspaper requires a 20% rate of return, what minimum useful life must it obtain from the vending machines?
(C) What would be the rate of return if the vending machines were to last indefinitely?