A company must choose between two new computer operating systems: Linux and Windows,to replace the existing system to support its ongoing operations.System Linux costs $50,000 and requires annual maintenance costs of $6,000 during its four-year life.System Windows costs $75,000 and requires annual maintenance cost of $4,500 during its six-year life.The appropriate discount rate is 8 percent.Which system should the firm choose? Assume both systems can be replicated.

Question

Quizplus · Accepted Answer

System Linux's NPV = -$50,000 - $6,000*PVAF(8%,4)= -$69,872.76
System Linux's EANPV
 11ea8229_3482_35eb_bbd8_957e3e651691_TB1726_00 System Windows's NPV = -$75,000 - $4,500*PVAF(8%,6)= -$95,802.96
System Windows's EANPV
 11ea8229_3482_5cfc_bbd8_11651a061d44_TB1726_00

A Company Must Choose Between Two New Computer Operating Systems