Question

Asked Sep 15, 2019

Questions E5-4 and E5-6

Step 1

**Part E5-4:**

To make the decision as to whether the firm should make the investment or not we need to use the net present value (NPV) decision rule. According to NPV decision rule, any investment (or project) with a positive NPV should be accepted.

Step 2

We need to calculate the present value of the savings estimates that the software will provide over its 5 year life. If the present value of the cash flows is greater than the present cost, then the investment should be accepted.

Step 3

Using the cash flows and the discount rate of 9%, we determined...

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