Small business is planning to buy computer system

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Reference no: EM131575491

A small business (Sunshine Sunroofs) is planning to buy a computer system for exist25,000. They have exist15,000 cash and will have to borrow the reminder of the purchase price. The vender indicates that the system will have a five year useful life and can be sold for exist3,000 at that time. Sunshine has signed up for a maintenance contract that will cost 42,000/year, but they expect to make an additional exist8,500 per year as a result of buying the system. The bank has agreed to loan terms of:equal annual payments over three years, with the first payment due EOY 3. The loan interest rate is 10% compounded annually. The companys MARR is 8% compounded annually, and they use a Present Worth Analysis.

Would you recommend the Sunshine Company invest in the computer system? Support your decision using Engineering Economic Analysis.

Reference no: EM131575491

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