(Ignore income taxes in this problem.) Allen College has a telephone system that is in poor condition. The system can be either overhauled or replaced with a new system. The following data have been gathered concerning these two alternatives:
Allen College uses a 12% discount rate and the total cost approach to capital budgeting analysis. Both alternatives are expected to have a useful life of eight years. The net present value of the overhaul alternative is

A)£(238,232).
B)£(108,000).
C)£(228,232).
D)£(232,272).

Question

(Ignore income taxes in this problem.) Allen College has a telephone system that is in poor condition. The system can be either overhauled or replaced with a new system. The following data have been gathered concerning these two alternatives:
Allen College uses a 12% discount rate and the total cost approach to capital budgeting analysis. Both alternatives are expected to have a useful life of eight years. The net present value of the overhaul alternative is

A)£(238,232). 
B)£(108,000). 
C)£(228,232). 
D)£(232,272).

Quizplus · Accepted Answer

The Answer of (Ignore income taxes in this problem.) Allen College has a telephone system that is in poor condition. The system can be either overhauled or replaced with a new system. The following data have been gathered concerning these two alternatives:
Allen College uses a 12% discount rate and the total cost approach to capital budgeting analysis. Both alternatives are expected to have a useful life of eight years. The net present value of the overhaul alternative is

A)£(238,232). 
B)£(108,000). 
C)£(228,232). 
D)£(232,272).

(Ignore Income Taxes in This Problem