Problem 11.24 Replace an Existing Asset 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 Mountain's opportunity cost of capital is 10 percent and the costs and values of investments made at different times in the future are as follows \begin{tabular}{|c|c|c|c|} \hline Cost of Capital: & 10.00% & & \\ \hline & Year & Cost & Future Savings \\ \hline & (at time of purchase) \\ \hline 0 & $5,000 & $7,000 \\ & 1 & 4,500 & 7,000 \\ & 2 & 4,000 & 7,000 \\ \hline 3 & 3,600 & 7,000 \\ \hline 4 & 3,300 & 7,000 \\ \hline 5 & 3,100 & 7,000 \\ \hline \end{tabular} When should Bell Mountain buy the new accounting system? Hint: Calculate the net present value (NPV) of each alternative and choose the one with the highest NPV. Value of Year Cost Future Savings NPV of Alternative The maximum NPV given the alternatives is