$1.$ The computer system used to control a production process at a large production facility is being considered for replacement. Three options will be evaluated: the defending existing computer system, Challenger I, which has been considered to be the best option at the current time, and Challenger II$.$ However, the Challenger II model will become available in one year with significant technological modifications and improvements. Salvage value projections are provided. Other assumptions are the performance of all three would be comparable. The discount rate is $12$ percent, and the useful life for each case is five years. Should the existing system be replaced this year, next year, or not at all?

Salvage Value at End of the Year, $

Year Existing Computer $($Defender$)$ Challenger I Challenger II

$020,00025,00024,000$

$116,00022,00023,000$

$213,00021,00023,000$

$311,00020,00022,000$

$48,00016,00016,000$

$53,00010,00010,000$