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. Show BOTH MANUAL AND SPREADSHEET SOLUTIONS.
Copier, Initial Operating Cost, Annual Salvage
Name Investment $ $ per Year Revenue 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