Question
Sylvie bought a computer 3 years ago for $3000, which she can now sell on the open market for $300. The local Mr. Computer store
Sylvie bought a computer 3 years ago for $3000, which she can now sell on the open market for $300. The local Mr. Computer store will sell her a new HAL computer for $4000, including the new accounting package she wants (to continue doing MECH431 problems forever). Her own computer will probably last another 2 years, and then would be worthless. The new computer would have a salvage value of $300 at the end of its minimum-cost life / economic life of 5 years. The net benefits to Sylvie of the new accounting package and other features of the new computer amount to $800 per year. An additional feature of the offer is that Mr. Computer will give Sylvie a $500 trade-in on her current computer. If the interest rate is 15%, what should Sylvie do?
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