Allen College Has a Telephone System That Is in Poor

question 47

Multiple Choice

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:

• A)($238,232)
• B)($108,000)
• C)($228,232)
• D)($232,272)

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Definitions:

Efficient

The characteristic of being able to accomplish a task or function with the minimum waste of time and effort; effectiveness combined with resourcefulness.

Capital Market History

The historical trends and events involving the trading of securities, affecting the structure and behavior of the capital market.

Bearing Risk

The action or practice of assuming the potential for loss or danger in a financial operation or investment.

Dollar Return

The total amount of money gained or lost on an investment, expressed in dollars.