Should kermit purchase the new computer system

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Reference no: EM13181871

Kermit is considering purchasing a new computer system. The purchase price is $100,000. Kermit will borrow one-fourth of the purchase price from a bank at 10 percent per year compounded annually. The loan is to be repaid using equal annual payments over a 3-year period. The computer system is expected to last 5 years and has a salvage value of $6,000 at that time. Over the 5-year period, Kermit expects to pay a technician $20,000 per year to maintain the system but will save $60,000 per year through increased efficiencies. Kermit uses a MARR of 12 percent to evaluate investments. Based on net present worth analysis, should Kermit purchase the new computer system?

Reference no: EM13181871

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