A software company currently uses a traditional server-based system to manage its operations, which incurs significant maintenance costs and requires regular hardware upgrades. The fixed costs associated with the server-based system are $500,000 per year, while the variable costs per user are $150 per year. The company is considering switching to a cloud-based system, which would increase the fixed costs by 25 percent but decrease the variable costs per user by 40 percent.

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If the company expects to have 5000 users next year, should the company switch to the cloud-based system? Justify your answer