Question

Tom is comparing two printers for his small business. The purchase price for Printer A is $1,000, with maintenance and operations costs of $400. Printer B increases productivity by $100, and reduces the maintenance and operations costs by half. The expected lifetime value is one year for both printers. What is the economic value to the customer (EVC) of Printer B

Answer 1

Answer:

EVC = $1300

Explanation:

In this question, we need to find the economic value to the customer (EVC) of Printer B.

First of all we need to know the basics of Economic value of a product,

It is basically starts with evaluating the additional values of the product first which are associated with it and then, those values are added to the next best product in the market. In this case, Printer A is the next best product whose price is $1000.

We know that, Printer B increase productivity by $100

Reduce the maintenance and operations costs by half, which means $400/2 = $200.

Additional value of the product = $100 + $200

Cost of the next best product = $1000

So,

According to the EVC definition and understandings, we must add the additional values of the product to value of the next best product.

Hence,

EVC = $1000 + $100 + $200

EVC = $1300