25. Add-or-drop with net present value analysis (builds on material in Chapters Six and Seven). Franklin County Hospital, a nonprofit hospital, bought and installed a new com- puter system last year for $90,000. The system is designed to relay information between labs and medical units. Charlene Walker, the hospitals new computer specialist, had a meeting with Lou Campbell, vice president of finance. She said: Lou, today I read in a journal that a new computer system has just been introduced. It costs $50,000, but I believe that by replacing our old system, we could reduce operating and maintenance costs that are now being incurred. The following are Walkers estimates:

	Present System	New System
Purchase and installment price	$90,000	$50,000
Useful life when purchased	6years	5 years
Computer operating costs per year	$35,000	$25,000
Computer operating and maintenance costs per year	$15,000	$8,000
Depreciation expenses per year	$15,000	$10,000
Cost of capital	10%	10%

a. Based on an analysis, what advice should Walker give Campbell?

b. At what price for the new computer system would Campbell be indifferent on this decision?

c. Is this a typical make-or-buy decision? Why or why not?