Assume you are meeting with Cisco and Avaya as potential vendors to purchase network equipment.
The initial Cisco network equipment will cost you $10,000 now, $3,000 of maintenance every year for the next 3 years and $1,000 for lease upgrade in year the year later.
The initial Avaya network equipment will cost you $11,000 now, $3,000 of maintenance every year for the next 2 years and $2,500 for lease upgrades for the next two years.
The rate of return is 5% per year. As a manager, how much should you “presently” budget for now for purchasing Cisco vs. Avaya equipment? Which would you choose? (Hint: Time value of money: FV=PV(1+i)n