Question: Tom Stone is considering buying a new computer to better manage his business. The initial cost of the computer is $8,500. It has a life

Tom Stone is considering buying a new computer to better manage his business. The initial cost of the computer is $8,500. It has a life expectancy of 6 years and will generate a savings of $2,000 per year. It will have no value at the end of the 6 years.

Tom determined he will need a required rate of return of 15% annually in order to make this investment in the new computer.

Should Tom buy this new computer? Explain your answer and show your detailed calculations. (6.5 points)

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