Performing a Breakeven Analysis
In the previous example you computed the uniform periodic equivalent for a rent-buy scenario. Now let’s perform a breakeven analysis to see how the MARR affects the time values.
To perform the breakeven analysis, follow these steps:
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Select both options.
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Select Analyze
Breakeven Analysis.
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Enter 01JAN1996 for the Date.
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Enter 12.0 for Value.
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Enter 4.0 for (+/-).
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Enter 0.5 for Increment by.
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Click Create Breakeven Analysis Summary to fill the Breakeven Analysis Summary area as displayed in Figure 57.7.
Figure 57.7: Performing a Breakeven Analysis
Click Graphics to view a plot displaying the relationship between time value and MARR.
Figure 57.8: Viewing a Breakeven Graph
As shown in Figure 57.8, renting is better if you want a MARR of 12%. However, if your MARR should drop to 10.5%, buying would be better.
With a single investment, knowing where the graph has a time value of 0 tells the MARR when a venture switches from being profitable to being a loss. With multiple investments, knowing where the graphs for the various investments cross each other tells at what MARR a particular investment becomes more profitable than another.