Sunland Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. The firm uses a 8 percent discount rate for production system projects. Year 0 1 2 3 System 1 -$13,900 13,900 13,900 13,900 System 2 NPV of System 1 is $ -$45,200 32,100 32,100 32,100 Calculate NPV. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Do not round discount factors. Round other intermediate calculations and final answers to 2 decimal places, e.g. 15.25.) 19,585.72 and NPV of System 2 is $ In which system should the firm invest? The firm should invest in System 2 V 34,649.07

Sunland Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. The firm uses a 8 percent discount rate for production system projects. Year 0 1 2 3 System 1 -$13,900 13,900 13,900 13,900 System 2 NPV of System 1 is $ -$45,200 32,100 32,100 32,100 Calculate NPV. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Do not round discount factors. Round other intermediate calculations and final answers to 2 decimal places, e.g. 15.25.) 19,585.72 and NPV of System 2 is $ In which system should the firm invest? The firm should invest in System 2 V 34,649.07

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Sunland Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive,
and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. The firm uses a 8 percent
discount rate for production system projects.
Year
0
1
2
3
System 1
-$13,900
13,900
13,900
13,900
System 2
NPV of System 1 is $
-$45,200
32,100
32,100
32,100
Calculate NPV. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Do not round
discount factors. Round other intermediate calculations and final answers to 2 decimal places, e.g. 15.25.)
19,585.72 and NPV of System 2 is $
In which system should the firm invest?
The firm should invest in System 2
34,649.07

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