Problem 11.24 Bell Mountain Vineyards

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Problem 11.24 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 11.6 percent, and the costs and values of investments made at different times in the future are as follows:

 

 

 

Year     Cost                   Value of Future Savings (at time of purchase) 0         $5,000                 $7,000

 

1         $4,700                   7,000

 

2           4,400                   7,000

 

3           4,100                   7,000

 

4           3,800                   7,000

 

5           3,500                   7,000

 

 

 

This is the Question

 

Calculate the NPV of each choice. (Round answers to the nearest whole dollar, e.g. 5,275.)

 

The NPV of each choice is:

 

 

 

NPV 0

 

NPV1

 

NPV 2

 

NPV 3

 

NPV 4

 

NPV 5

 

 

 

Suggest when should Bell Mountain buy the new accounting system?

 

Bell Mountain should purchase the system in

    • 9 years ago
    Problem 11.24 Bell Mountain Vineyards
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