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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:

  1. Select both options.

  2. Select Analyze Breakeven Analysis.

  3. Enter 01JAN1996 for the Date.

  4. Enter 12.0 for Value.

  5. Enter 4.0 for (+/-).

  6. Enter 0.5 for Increment by.

  7. Click Create Breakeven Analysis Summary to fill the Breakeven Analysis Summary area as displayed in Figure 49.7.

Figure 49.7 Performing a Breakeven Analysis
Performing a Breakeven Analysis

Click Graphics to view a plot displaying the relationship between time value and MARR.

Figure 49.8 Viewing a Breakeven Graph
Viewing a Breakeven Graph

As shown in Figure 49.8, 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.

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