[Jewelry making - Article 00031] - [Orchid] Calculating capital investment return

[Neilthejeweler]

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    Its easy enough to calculate profit when you lease a piece of
    equipment...but how would you figure break even point if you make an
    outright purchase? 

    It was suggested to me that X number of jobs at $Y should equal
    initial cost. Sounds reasonable enough. But If I'm buying this thingy
    outright, shouldn't I be looking for an increased profit within the
    same time frame, over and above what doing it the old way would have
    yielded? Should I expect increased profit per job, not just to pay
    for the machine, but because profit (now or soon) is what its really
    about? 

    Example...I lease for four years at $600 month or purchase at $20K.
    Leasing it I know I have to produce $600 plus operating expenses to
    cover the lease. >From then on, during that month I gain profit, it
    being gross sales minus lease minus all operating expenses. Per job
    price is figured by taking all those costs and factoring in a profit
    margin, divide by anticipated volume of jobs.. Simple, right? 

    If I purchase, its much harder, in my feeble mind, to grasp several
    things. One, what is the usual time frame to recoup investment? Do I
    simply 'pretend' I have a lease just so I have some sort of cost/time
    perspective? Two, how severely am I effected tax wise if I purchase
    vs lease? Should I factor that 'penalty' into my price determination
    offset by interest savings? 

    I'm not going to lease. Done with avoidable long term obligations.
    Been there, done that, no thank you. But if I have to wait four years
    to break even, that doesn't sound too enticing. 

    I'm looking to justify this purchase on sound business reasoning not
    just cuz I want the darned thing.
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