Computer equipment The directors of SendIT Limited are considering an upgrade to the companys current computer equipment. The new computer equipment will cost R500 000. The useful life of the new computer equipment is estimated at five years, and the residual value is estimated at R120 000. The current computer equipment has an average operating cost of R55 000 per year. The new computer equipment will require an average oper-ating cost of R30 000 per year and increase SendIT Limiteds productivity by an esti-mated value of R50 000 per year. The current computer equipments market value is R130 000, and the tax value is R93 750. Management estimated that the existing com-puter equipment has a remaining useful life of 5 years and a residual value of Rnil in 5 years. All computer equipment is written off over 4 years for tax purposes.

REQUIRED:

With reference to the Computer equipment, advise SendIT Limited on whether they should invest in the new computer equipment by using the net present value method. (24 marks)