(Ignore Income Taxes in This Problem

question 21

Multiple Choice

(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 capital budgeting analysis. Both alternatives are expected to have a useful life of eight years. The net present value of the new system alternative is

• A)£(233,300).
• B)£(283,300).
• C)£(263,100).
• D)£(273,100).

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