1. Determine the NPV of the new computer system (use 3 decimal places for the PV factor) Billings Office Services is considering the purchase of a new computer system to replace the one inoperation. Data on the new computer system are as follows:Cost$12,000Salvage value at the end of five yearsUseful life, in yearsAnnual operating cost$1,0005$4,000If the existing computer system is kept and used, it would require the purchase of additional hardwarea year from now costing $2,000. After the use of the system for five years, the salvage value would be$300. Additional information on the existing system is as follows:Additional years of useAnnual operating costsRemaining book valueCurrent salvage valueCost of capital$9,000$12,000$3,00012%The company uses the straight-line method of depreciation with no mid-year convention.

The NPV of a project can be defined as the current value of all future costs and benefits of the…

Answered: Determine the NPV of the new computer…

Business

Finance

Determine the NPV of the new computer system

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 14P

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