Question
In: Finance
Blossom Corp. management is investigating two computer systems. The Alpha 8300 costs $3,006,625 and will generate...
Blossom Corp. management is investigating two computer systems. The Alpha 8300 costs $3,006,625 and will generate cost savings of $1,548,725 in each of the next five years. The Beta 2100 system costs $4,627,500 and will produce cost savings of $1,177,750 in the first three years and then $2 million for the next two years. The company’s discount rate for similar projects is 14 percent.
What is the NPV of each system? (Enter negative amounts using negative sign, e.g. -45.25. Do not round discount factors. Round other intermediate calculations and final answer to 0 decimal places, e.g. 1,525.)
NPV of Alpha system _____
NPV of Beta system _____
Which one should be chosen based on the NPV? Blossom should chose the _______ system.
Solutions
Expert Solution
Solution :
NPV of Alpha system = $ 2,310,273
NPV of Beta system = $ 329,700
The NPV of Alpha System at $ 2,310,273 is higher than that of Beta System at $ 329,700
Thus Alpha System with higher NPV of $ 2,310,273 should be chosen based on NPV.
Blossom should chose the Alpha 8300 system.
Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.
jeff jeffy answered 8 months agoRelated Solutions
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