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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Jim Patterson who wrote (44448)	5/22/1998 3:10:00 PM
From: Meathead	Read Replies (1) \| Respond to of 176387

Jim, you are ignoring worker productivity in your asessment. It's far more complex of an analysis procedure than the idiot simple example I gave. It was for illustrative purposes only. MEATHEAD

To: Jim Patterson who wrote (44448)	5/22/1998 3:17:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 176387

Jim, you're right. The economic analysis depends on two assumptions: 1. The economic life of the purchase; and 2. The average weighted cost of capital. I think your arithmetic is incorrect. Just for fun, let's try a four and six year replacement cycle. At four years and zero cost of capital, the cheaper machine costs 875 per annum (3,500/4), while the more expensive machine costs $750 (4,500/6) per annum. Using a 10% cost of capital figure, those numbers become 1,033 and 1,104 respectively. So even using a 10% cost of capital figure and a longer economic lifetime (both of which favor buying the "cheaper" machine) the economics still argue persuasively in favor of buying "cutting edge" and upgrading less frequently. At a zero cost of capital the point of equivalence is 7 and 9 years respectively. It's hard for me to imagine two year old technology lasting an additional 7 years. TTFN, CTC