Bell Mountain Vineyards is considering updating its current manual accounting sy

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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

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 13.4 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

Hi,

Please find the answer as follows:

Part A:

Part B:

Machine should be purchased in Year 5.

Thanks.

Value of Future Savings (A) Cost (B) Difference (A-B) NPV 0 7,000 5,000 2,000 2,000 1 7,000 4,250 2,750 2425 2 7,000 3,500 3,500 2722 3 7,000 2,750 4,250 2914 4 7,000 2,000 5,000 3024 5 7,000 1,250 5,750 3066

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