A New Computer System Is Expected to Cost $40 Million

question 47

Multiple Choice

A new computer system is expected to cost $40 million and generate annual savings of $12 million over the next five years. Should the bank invest in this project if the discount rate is 12 percent?

• A)Yes, because the net present value of the project is $3,257,314.
• B)No, because the net present value of the project is -$3,257,314.
• C)Yes, because the net present value of the project is $20 million.
• D)No, because the net present value of the project is -$20 million.
• E)Yes, because the net present value of the project is $4,980,000.

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Definitions:

Cinnamaldehyde

A yellow oily compound that gives cinnamon its flavor and odor, known chemically as a phenylpropanoid.

Claisen Product

The β-keto ester or β-diketone result obtained from a Claisen Condensation reaction.

Methyl Phenylacetate

An organic compound characterized by an ester functional group connecting a methyl group and a phenylacetate group.

Aldol Reaction

A type of chemical reaction in which an enolate ion reacts with a carbonyl compound to form a β-hydroxyaldehyde or β-hydroxyketone, followed often by dehydration to give a conjugated enone.