Q-H ●14. The mayor of Trenton is considering thepurchase of a new computer system for the city'stax department. The system costs $84,000 and hasan expected life of five years. The mayor estimatesthe following savings will result if the system ispurchased:Year or Periodordinary annuity at 8%$ 29,0000.9261234,000 0.8571.7833 39,000 0.794 2.57724,000 0.735 3.31245 21,000 0.681 3.993Trenton uses a 8% discount rate for capital-budgetingdecisions.$21,920.Savings PV of $1 at 8% PV of anA salesperson from a different computer companyclaims that his machine, which costs $94,000 and hasan estimated service life of four years, will generateannual savings for the city of $35,000. If the discountrate is 8%, the net present value of this system wouldbe:$28,655.$72,512.0.926$115,920.None of the answers is correct.

Annual savings = $35,000Cost = $94,000Discount rate = 8%Useful life = 4 years

Answered: 14. The mayor of Trenton is considering…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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14. The mayor of Trenton is considering the purchase of a new computer system for the city's tax department. The system costs $84,000 and has an expected life of five years. The mayor estimates the following savings will result if the system is