A data processing center is plagued by employee complaints about back pain. Analysts estimate that upgrading office furniture at a cost of $425,000 would reduce the incidence and severity of back injuries, thus allowing the center to avoid medical care that currently costs $68,000 each year.

The analysts estimate that the replacement furniture will also provide yearly benefits of avoided losses in work time and employee discomfort worth $18,000.

The furniture has a useful life of five years, after which it would have a positive salvage value equal to 10 % of its original cost. The analysts base their estimates of avoided costs with the assumption that they occur at the start of each year.

In its investment decisions, the center uses a real discount rate of 8 percent. Should the center purchase the new furniture?