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 14.7 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.) The NPV of each choice is:

Explanation / Answer

Year Cost Value of Future Savings (at time of purchase) NPV 0 $     5,000 $     7,000 $2,000 1 $     4,300 $     7,000 $2,354 2 $     3,600 $     7,000 $2,584 3 $     2,900 $     7,000 $2,717 4 $     2,200 $     7,000 $2,773 5 $     1,500 $     7,000 $2,770 The NPV of each choice is: Year NPV 0 $        2,000 1 $        2,354 2 $        2,584 3 $        2,717 4 $        2,773 5 $        2,770 Suggest when should Bell Mountain buy the new accounting system? Bell Mountain should purchase the system in Year 4

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