Question
1. A financial manager is considering upgrading a firm's IT system. Two systems are under consideration: A fast system and a slow system. a. The
1. A financial manager is considering upgrading a firm's IT system. Two systems are under consideration: A fast system and a slow system.
a. The fast IT system will improve cashflows by $392,000 at the end of every year over three years and costs $821,000 today. What is the NPV of the fast system? Assume an interest rate of 7% per year. Enter your answer rounded to the nearest whole dollar and include a negative sign if necessary
b. The slow IT system will improve cashflows by $293,000 at the end of every year over three years and costs $698,000 today. What is the NPV of the slow system? Assume an interest rate of 7% per year. Enter your answer rounded to the nearest whole dollar and include a negative sign if necessary
c. Which IT system should the financial manager choose for the upgrade?
- The slow IT system.
- It does not matter.
- The fast IT system.
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Financial management theory and practice
Authors: Eugene F. Brigham and Michael C. Ehrhardt
13th edition
1439078106, 111197375X, 9781439078105, 9781111973759, 978-1439078099
