Hillsdale Is Considering Two Options for Comparable Computer Software

question 38

Essay

Hillsdale is considering two options for comparable computer software. Option A will cost $25,000 plus annual license renewals of $1,000 for three years, which includes technical support. Option B will cost $20,000 with technical support being an add-on charge. The estimated cost of technical support is $4,000 the first year, $3,000 the second year, and $2,000 the third year. Assume the software is purchased and paid for at the beginning of year one, but that technical support is paid for at the end of each year. Interest is at 8%. Ignore income taxes.
Required: Determine which option should be chosen based on present value considerations.

---

Definitions:

Ageism

Prejudice or discrimination against individuals based on their age, often targeting older adults but can affect younger people as well.

Favouritism

The practice of giving unfair preferential treatment to one person or group at the expense of others.

Elisabeth Kübler-Ross

A Swiss-American psychiatrist known for her groundbreaking work on the five stages of grief, which has had a significant impact on palliative care and psychology.

Accepting Death

The process of understanding and coming to terms with the inevitability of death, often involving emotional and psychological adjustment.