A new system would cost $15,000 per store or $2,955,000 for all 197 locations and will result in an annual return of $985,000. Neither the old or new system (tags included) will have any salvage value at the end of its seven (7) year life span. The income tax rate is 40 percent.

The Board and executive officers will want to see all the calculations in responding to the following:

1. Determine whether the new system will have a positive net present value if the minimum acceptable rate of return is 10 percent per year compounded annually? (Factor = 4.868)