1. BestCare Holdings a Private Limited Company in the tourism Industry in order to improve customer service and provide management with timely and quality information, the company is contemplating purchasing 6 microcomputers at shs. 112000 each. Installation cost for all of them will amount shs. 60,000. It is estimated that once installed the company will increase pre-tax operating benefit from shs. 11,760,000 to shs. 11,955,000 annually. Computers are expected to last for 8 years after which these will be obsolete with no residue value. The operations manager believes the computers will be used for as long as 10 years with no resale value. The marketing manager argues the company needs will have to grow in only 5 years. The computers will be salvaged for shs. 32,000 each after 5 years 30% tax bracket. The cost of capital is 16% and the straight line method of depreciation is used to depreciate all fixed assets.

Suppose the publicity useful life of these computers is determined as follows:

Probability Useful life

0.3 5 years

0.5 8 years

0.2 10 years

Determine whether Best Care Limited should purchase the computers.