A Simple Example
A simple example illustrates the different bases for comparison. Suppose that a Mr. Kinkaid is planning to create a new software product that he'll develop and market on his own. He expects this project to last 7 years, and he'll start by investing $10,000 to buy computer hardware and a software-development environment. He estimates that annual operation and maintenance costs for the computer hardware and software will run at about 8.5% of the combined hardware and software costs, or $850 for each of the 7 years.
Mr. Kinkaid is working on this project part-time, so he doesn't expect to sell the first copy until after the beginning of the second year. Income per copy after selling expenses is targeted at $75. Table 8.1 shows his ...
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