A firm is contemplating replacing a computer (D) it purchased three years ago for $6,000. In two year it will have a salvage value of $800. Operating a maintenance costs have been $1,000 per year. The computer currently has a trade in value of $3,000 toward a new computer (C) that costs $5,000 and has a five (5) year life. The new computer will have annual operating and maintenance costs of $500 per year and a expected salvage value of $1,000 at the end of the five (5) years. Companys policy demand that any computer should be replaced after five (5) years in service. Determine is the current computer should be replaced. Use a 9% rate of return.

EACC = $2322.63 and EACD = $1,618.36, should not be replaced

EACC = $1,637.62 and EACD = $1,618.36, should be replaced

EACC = $1,618.36 and EACD= $2,322.63, should be replaced

EACC = $1,618.36 and EACD= $2,322.63, should be not replaced