Question
Bell Mountain Vineyards is considering updating its current manual accounting system with a high-end electronic system. While the new accounting system would save the company
Bell Mountain Vineyards is considering updating its current manual accounting system with a high-end electronic system. While the new accounting system would save the company money, the cost of the system continues to decline. The Bell Mountains opportunity cost of capital is 12.0 percent, and the costs and values of investments made at different times in the future are as follows:
| Year | Cost | Value of Future Savings (at time of purchase) | |
|---|---|---|---|
| 0 | $5,000 | $7,000 | |
| 1 | 4,600 | 7,000 | |
| 2 | 4,200 | 7,000 | |
| 3 | 3,800 | 7,000 | |
| 4 | 3,400 | 7,000 | |
| 5 | 3,000 | 7,000 | |
Calculate the NPV of each choice. (Round answers to the nearest whole dollar, e.g. 5,275.)
The NPV of each choice is:
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Risk Sharing Finance
Authors: Bakkali Mirakhor, Saad Abbas
1st Edition
3110590468, 978-3110590463
