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# is considering replacement of its two-year old computer. Original purchase price was \$4,000 with expected operating costs of \$500 for the third year....

Ltd. is considering replacement of its two-year old computer. Original purchase price was \$4,000 with expected operating costs of \$500 for the third year. A new computer costs \$5,000, and will not require any maintenance in its first two years of operation.
Should the old computer be replaced if inflation is 2% per year, real interest rate is 5%, depreciation rate for the old computer is 25% and depreciation rate for the new computer is 15%?

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XYZ Ltd. is...

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