What is equivilent annual cost for swithcing to new system

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Reference no: EM13154540

Beth bought a computer 3 years ago for $3000, which she can now sell on the open market for $300. The local computer shop will sell her a new system for $4000, inlcluding the new graphic software that she wanted, although, she can cope with the software that she currently owns. Her own comptuer will last 2 more years, and will then have a salvage value of zero. The new computer will have a salvage value of 300 at the end of its economic life in 5 years. The net benifets of the new computer including the graphic software have a value of 800 per year. An adiitional feature is that the computer shop will give her 500 for her old computer on a trade in.

Interest = 15%

What is the equivilent annual cost for keeping her computer?

What is the equivilent annual cost for swithcing to the new system?

What should Beth do?

Reference no: EM13154540

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