Question 5 (11 marks) Denise Hospital has an auxiliary generator that is used when power failures occur. The generator is worn out and must be either overhauled or replaced with a new generator. The hospital has assembled the following information: Purchase cost new..... Remaining book value Overhaul needed now Annual cash operating costs. Salvage value-now....... Salvage value-eight years from now Present New Generator Generator $16,000 $20,000 $9,000 $8,000 $12,500 $7,500 $4,000 $3,000 $6,000 If the company keeps and overhauls its present generator, then the generator will be usable for eight more years. If a new generator is purchased, it will be used for eight years, after which it will be replaced. The new generator would be diesel-powered, resulting in a substantial reduction in annual operating costs, as shown above. The hospital computes depreciation on a straight-line basis. All equipment purchases are evaluated using a 12% discount rate. Required: Should Denise Hospital keep the old generator or purchase the new one? Support your answer with detailed computation. Ignore tax when answering this question. (11 marks)