Question:
Bell Mountain Vineyards is considering updating its existing 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 refuse. The Bell Mountain's opportunity cost of capital is 14.7%, and the costs and values of investments made at different times in the future are as follows:
Year Cost Value of Future Savings
0 $5,000 $7,000
1 4,550 7,000
2 4,100 7,000
3 3,650 7,000
4 3,200 7,000
5 2,750 7,000
Determine the NPV of each choice.
The NPV of each choice is:
NPV0 = ?
NPV1 = ?
NPV2 = ?
NPV3 = ?
NPV4 = ?
NPV5 = ?
Suggest when could Bell Mountain buy the new accounting system?