A set of servers, that your project needs, has a daily lease cost of $500 for the first 20 days and the lease cost is reduced to $200 daily for any days after the first 20 days. If the team decides to purchase this set of servers, the investment cost is $11,000 and a daily operational cost of $75. (a) After how many days will the purchase cost be same as the lease cost

After 25 days of lease, the purchase cost will be the same as the lease cost.

Explanation:

a) Data and Calculations:

Initial investment (purchase) cost = $11,000

Lease cost = $10,000 ($500 * 20)

Difference in purchase and lease cost = $1,000 ($11,000 - $10,000)

Daily lease cost after the first 20 days = $200

Additional number of days for purchase cost to equal lease cost = $1,000/$200 = 5 days

b) One can infer from the above that it will benefit the company more to purchase the set of servers by making the initial investment of $11,000 than leasing the servers.

c

explanation: