(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 net present value analysis. Both alternatives are expected to have a useful life of eight years.

-The net present value of the alternative of overhauling the present system is closest to:

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 net present value analysis. Both alternatives are expected to have a useful life of eight years.

-The net present value of the alternative of overhauling the present system is closest to:

Quizplus · Accepted Answer

Based on the calculation, the net present value of overhauling the present system is $228,232, which is the closest to choice C. Therefore, the best choice is to overhaul the present system.

(Ignore Income Taxes in This Problem