The course of action you take would depend on your specification and set up. Far more information is needed than you've provided.
For example, is it a laptop or desktop? Make and model? Factory-built or shop (custom spec) built? What type of hard drive is it? Can you start the machine in Safe Mode? Have you contacted the shop to iron out the discrepancy between the version of Windows the computer thinks it has installed and the one provided for on your recovery CD? How old is the system? Is it still in warranty?
If the hard drive is physically faulty, then the only option is to replace it. More likely, however, something's got corrupted somewhere and just needs sorting out. You shouldn't have to buy a new PC, but if it's an old system and is slow running anyway it might be worth it.