Missoula Office Services Is Considering the Purchase of a New

Missoula Office Services is considering the purchase of a new server to replace the one in operation. Data on the new server are as follows: $\begin{array}{lr}\text { Cost } & \$ 12,000 \\\text { Salvage value at the end of five years } & \$ 1,000 \\\text { Useful life, in years } & 5 \\\text { Annual operating cost } & \$ 4,000\end{array}$
If the existing server is kept and used, it would require the purchase of additional hardware a year from now costing $2,000. After the use of the server for five years, the salvage value would be $300. Additional information on the existing system is as follows: $$\begin{array} { l r } \text { Additional years of use } & 5 \\\text { Annual operating costs } & \$ 9,000 \\\text { Remaining book value } & \$ 12,000 \\\text { Current salvage value } & \$ 3,000 \\\text { Cost of capital } & 12 \%\end{array}$$
The company uses the straight-line method of depreciation with no mid-year convention.
Required:
Should the new server be purchased? Why or why not?