The old computer is being depreciated at a rate of $376,000 per year. It will be completely written off in three years. If we don't replace it now, we will have to replace it in two years. We can sell it now for $576,000: in two years, it will probably be worth $168,000. The new machine will save us $348,000 per year in operating costs. The tax rate is 23 percent, and the discount rate is 23 percent, and the discount rate is 10 percent.

a-1 Calculate the EAC for the old and new computer.

a-2 What is the NPV of the decision to replace the computer now?