NEC Service Company Is Considering the Purchase of New Computer

NEC Service Company is considering the purchase of new computer system to replace the one in operation. Data on the new computer system are as follows:
$$\begin{array} { l r } \text { Cost } & \$ 12,000 \\\text { Salvage value at the end of } 5 \text { years } & 2,000 \\\text { Useful life } & 5 \text { years } \\\text { Annual operating costs } & \$ 4,000 \\\text { Discount rate } & 10.0 \%\end{array}$$ If NEC Service keeps and uses the existing computer system, it would need to purchase additional hardware, a year from now, costing $2,000. After the use of the system for 5 years, its salvage value would be $300. Additional information on the existing system is as follows:
$$\begin{array}{lr}\text { Additional years of use } & 5 \\\text { Annual operating costs } & \$ 9,000 \\\text { Remaining book value } & \$ 12,000 \\\text { Current salvage value } & 3,000\end{array}$$ Required:
Use the differential cost approach to determine which computer system is the better choice, using a spreadsheet or financial calculator. Show cash flows used in your calculations in good format and indicate the reasoning on which the decision is based.