Hazem capital budgeting analyst HADARA

software , Inc., has been asked to evaluate a

proposal. The manager of the automotive division

believes that replacing the old software used on

the existing computers will produce total benefits

of $500000 (in today's dollars) over the next 5

years. The existing software would produce

benefits of $280000 (also in today's dollars) over

that same time period. An initial cash investment

of $250000 would be required to install the new

software. The manager estimates that the existing

software can be sold for $75000. Show how

HAZEM will apply marginal cost-benefit analysis

techniques to determine the following:

The marginal (added) benefits of the proposed

new software?

The marginal (added) cost of the proposed new

software?

The net benefit of the proposed new software?