A new computer system will require an initial outlay of $12,850, but it will increase the firm's cash flows by $3,000 a year for each of the next 6 years. a. Calculate the NPV and decide if the system is worth installing if the required rate of return is 8%. Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places. Net present value Worth installing b. Calculate the NPV and decide if the system is worth installing if the required rate of return is 13%. Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places. Net present value Worth installing

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 5PA: Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated...
Question
A new computer system will require an initial outlay of $12,850, but it will increase the firm's cash flows by $3,000 a year for each of
the next 6 years.
a. Calculate the NPV and decide if the system is worth installing if the required rate of return is 8%.
Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to
2 decimal places.
Net present value
Worth installing
b. Calculate the NPV and decide if the system is worth installing if the required rate of return is 13%.
Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to
2 decimal places.
Net present value
Worth installing
Transcribed Image Text:A new computer system will require an initial outlay of $12,850, but it will increase the firm's cash flows by $3,000 a year for each of the next 6 years. a. Calculate the NPV and decide if the system is worth installing if the required rate of return is 8%. Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places. Net present value Worth installing b. Calculate the NPV and decide if the system is worth installing if the required rate of return is 13%. Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places. Net present value Worth installing
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