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 13.6 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
Calculate the NPV of each choice. (Round answers to the
nearest whole dollar, e.g. 5,275.)
The NPV of each choice is:
NPV0 = $
NPV1 = $
NPV2 = $
NPV3 = $
NPV4 = $
NPV5 = $
Suggest when should Bell Mountain buy the new accounting
system?
