Question: A companys current computer system has a salvage value now of $5,000, which will fall to $4,000 by the end of the year. The cost

A companys current computer system has a salvage value now of $5,000, which will fall to $4,000 by the end of the year. The cost of the lower productivity linked to this computer system is $3,000 this year. A potential new system costs $12,000 and has the following salvage values and lost productivity for each year.

Year	0	1	2	3	4
Salvage Value	$12,000	$9,000	$7,000	$5,000	$3,000
Lost Productivity	--	$0	$1,000	$2,000	$3,000

The company uses a before-tax interest rate of 10%. Should the company engineering replace its computer system this year? Why?

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