Westland College Has a Telephone System That Is in Poor

question 60

Multiple Choice

Westland College has a telephone system that is in poor condition. The system either can be overhauled or replaced with a new system. The following data have been gathered concerning these two alternatives (Ignore income taxes.) : Use Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided.Westland College uses a 10% discount rate and the total cost approach to capital budgeting analysis. Both alternatives are expected to have a useful life of eight years.
The working capital would be released for use elsewhere when the project is completed.
The net present value of the alternative of purchasing the new system is closest to:

• A) $(1,076,495)
• B) $(1,236,495)
• C) $(1,169,895)
• D) $(969,895)

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