Solved

Doherty Industries Wants to Invest in a New Computer System

question 68

Multiple Choice

Doherty Industries wants to invest in a new computer system. The company only wants to invest in one system, and has narrowed the choice down to System A and System B. System A requires an up-front cost of $100,000 and then generates positive after-tax cash flows of $60,000 at the end of each of the next two years. The system can be replaced every two years with the cash inflows and outflows remaining the same.
System B also requires an up-front cost of $100,000 and then generates positive after-tax cash flows of $48,000 at the end of each of the next three years. System B can be replaced every three years, but each time the system is replaced, both the cash inflows and outflows increase by 10 percent.
The company needs a computer system for the six years, after which time the current owners plan on retiring and liquidating the firm. The company's cost of capital is 11 percent. What is the NPV (on a six-year extended basis) of the system which creates the most value to the company?

Analyze the evidence from meta-analyses and research studies concerning the efficacy of DBT, MBSR, and ACT.

Recognize the therapeutic relationship dynamics and progression in DBT.

Understand the principles and practices of mindfulness as applied in therapeutic contexts.

Understand the different stages of sleep and their characteristics.

Definitions:

Timeframe

A specified period during which certain events or activities are to take place or be completed.

Success of the Merger

The positive outcome of combining two or more companies, typically measured by financial performance, market share, and synergies achieved.

Loblaws

A Canadian supermarket chain, offering grocery products, pharmaceutics, banking, and clothing, among other things.

Shoppers Drug Mart

A Canadian retail pharmacy chain offering a wide range of health, beauty, and convenience products and services.