Galvanized products is considering a new computer system, Ask an Expert

Economics

Galvanized Products is considering a new computer system for their enterprise data management system. The vendor has quoted a purchase price of $100,000. Galvanized Products is planning to borrow one-fourth of the purchase price from a bank at 15 percent 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 $5,000 at that time. Over the 5-year period, Galvanized Products expects to pay a technician $25,000 per year to maintain the system but will save $55,000 per year through increased efficiencies. Galvanized Products uses a MARR of 18 percent/year to evaluate investments.

a) What is the present worth of this investment?

b) Should the new computer system be purchased?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91342196

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