Use present value and annuity tables to answer this problem. Also assume that the real interest rate = the nominal interest rate - the inflation rate.

The Kelly Heights Public Library is considering new digital tracking and check out system that would cost the system would eliminate the need for one circulation librarian (check-out clerk) for 51,000,000.

An annual savings of 575,000 and two part-time reference library interns who mainly help patrons find misplaced material for an annual savings of 550,000. The system will also allow the library to better monitor over-due material and will increase collection of over-due fines by 3O,0O a0nnually.The annual cost of maintaining the system is 525,000 The estimated economic life of the system is 10 years. The library would borrow at 6% to finance the system the current inflation rate is 2%.

1.ls the system a good investment?

2.The friend of the library a local nonprofit group that supports reading program and other library activities as agreed to donate $250,000 towards the cause of the new tracking and checking out system are we you change your analysis.

3.If instead of the friends making the contribution the state of enlightenment agrees to make fixed annual payment of $25,000 for the next 10 years how will you change your analysis .