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The New Corner Electronics Store wants to introduce a new computer system for its computer service. Development of the new system will take one year
The New Corner Electronics Store wants to introduce a new computer system for its computer service. Development of the new system will take one year at a cost of 50,000. The table below shows the projected costs and benefits for the first six years of operation.
Year | Costs | Benefits |
1 | 43,000 | 35,000 |
2 | 37,000 | 37,200 |
3 | 33,300 | 42,000 |
4 | 30,100 | 47,000 |
5 | 30,000 | 50,300 |
6 | 32,000 | 55,000 |
Do a cost-benefit analysis using the following methods:
a. Cash-flow analysis
b. Present value analysis. Assume the company uses a discount rate of 10% per annum.
c. What is your recommendation for The New Corner Electronics Store?
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