Galvanized Products is considering purchasing a new computer system for their enterprise data management system. The vendor has quoted a purchase price of $80,000. Galvanized Products is planning to borrow 1/4th of the purchase price from a bank at 15.00 % compounded annually. The loan is to be repaid using equal annual payments over a 3-year period. The computer system is expected to last 5 years and has a salvage value of $5,400 at that time. Over the 5-year period, Galvanized Products expects to pay a technician $23,000 per year to maintain the system but will save $50,000 per year through increased efficiencies. Galvanized Products uses a MARR of 15.00 %/year to evaluate investments Required:
a. What is the present worth of this investment?
b. Should the new computer system be purchased?