The mayor of Statesville is considering the purchase of a new computer system for the city's tax department. The system costs $75,000 and has an expected life of five years. The mayor estimates the following savings will result if the system is purchased: Picture Statesville uses a 10% discount rate for capital-budgeting decisions. A salesperson from a different computer company claims that his machine, which costs $85,000 and has an estimated service life of four years, will generate annual savings for the city of $32,000. If the discount rate is 10%, the net present value of this system would be:

$16,440.

$23,175.

$63,512.

$101,440.

None of the other answers are correct.

Answer rating: 100% (QA)

Solution Net present value ... View the full answer