Company operates a number of home improvement stores in a metropolitan area. Home Value's management estimates that if it invests $ 250,000 in a new computer system, it can save $ 65,000 in annual cash operating costs. The system has an expected useful life of eight years and no terminal disposal value. The required rate of return is 8%. Ignore income tax issues and assume all cash flows occur at year-end except for initial investment amounts.

Part B

Home Value Company operates a number of home improvement stores in a metropolitan area. Home Value's management estimates that if it invests $250,000 in a new computer system, it can save $65,000 in annual cash operating costs. The system has an expected useful life of eight years and no terminal disposal value. The required rate of return is 8%. Ignore income tax issues and assume all cash flows occur at year-end except for initial investment amounts. Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Present Value of $1 table Read the requirements. a. Calculate the payback period for the new computer system. (Abbreviations used: FV = future value; PV = present value. Use factor amounts rounded to three decimal places. Round your answers to the nearest whole dollar. Use a minus sign or parentheses for a negative net present value.) First, select the formula labels, then enter the amounts and calculate the payback period in years. Net initial investment 1 Uniform annual cash operating cost savings 250,000 65,000 = Payback period 3.85 b. Calculate the discounted payback period for the computer system. Begin calculating the discounted payback period by completing the table to calculate the net initial investment unrecovered at the end of the year. (Enter all amounts as positive numbers. Round the discount factor to three decimal places, X.XXX. For amounts with a $0 balance, make sure to enter "0" in the appropriate cell.) Cash Savings Discount factor 1.000 Discounted cash savings Cumulative discounted cash savings Net initial investment unrecovered at end of year Year -- i Requirements - X 0 Nm 7 Calculate the following for the new computer system: a. payback period; and b. discounted payback period. Print Done 00