Question: You are the manager of a pharmaceutical company and are considering what type of laptops to buy for your salespeople to take with them on their calls.
• You can buy fairly inexpensive (and less powerful) older machines for about $ 2,000 each. These machines will be obsolete in three years and are expected to have an annual maintentance cost of $ 150.
• You can buy newer and more powerful laptops for about $ 4,000 each. These machines will last five years and are expected to have an annual maintenance cost of $ 50. If your cost of capital is 12%, which option would you pick and why?