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Certified Business Analysis Professional (CBAP) · IIBA
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65000 + (5600*N) = 49000 + (6100*N), 65000-49000 = 6100N-5600N, 16000=500N, N = 32 Option B is correct as you should use the solution longer than the pay back period.
Can someone please explain how they got this answer?
First, you have to calculate the time (N) at which the total cost of ownership for both solution approaches will be equal, 65000 + (5600*N) = 49000 + (6100*N), 65000-49000 = 6100N-5600N, 16000=500N, N = 32. Because the maintenance cost for create is $5600 and the maintenance cost for purchase is $6100, then it means that after 32months, we will incur less maintenance cost on the create option. Hence, Option B is correct.