A firm contemplating replacing a computer

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A firm 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 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 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 five years. Company's policy demand that any computer should be replaced after 5 years in service. determine if the computer should be replaced. use a 9% rate of return.

a. EACc = 2,322.63 and EACd = 1,618.36, should not be replaced
b. EACc = 1,618.36 and EACd = 2,322.63 , should not be replaced
c. EACc = 1,637.62 and EACd = 1,618.36 , should be replaced
d. EACc = 1,618.36 and EACd = 2,322.63 , should be replaced

Reference no: EM13336829

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