Bell Mountain Vineyards is considering updating its current manual accounting sy

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 money, the cost of the system continues to decline. The Bell Mountain

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 15.3 percent, and the costs and values of investments made at different times in the future are as follows: Calculate the NPV of each choice. (Round answers to the nearest whole dollar, e.g. 5,275.)

Explanation / Answer

Hi,

Please find the answer as follows:

The system should be purchased in Year 5.

Thanks.

Year Value of Future Savings Cost Difference NPV 0 7000 5000 2000 2000 1 7000 4200 2800 2428 2 7000 3400 3600 2708 3 7000 2600 4400 2871 4 7000 1800 5200 2942 5 7000 1000 6000 2944

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