Question: City Bank upgrades its computer equipment every five years to keep up with changes in technology. Its next upgrade is two years from today and

City Bank upgrades its computer equipment every five years to keep up with changes in technology. Its next upgrade is two years from today and is budgeted to cost $1 million. Management is considering moving up the date by two years to install some new computers with breakthrough software that could generate significant cost savings. The cost for this new equipment also is $1 million. What should be the savings per year to justify moving up the planned update by two years? Assume a cost of capital of 15 percent

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