Question: ABC Ltd. is considering purchasing a new accounting information system (AIS) that costs $500,000. The system has an estimated useful life of five years and

ABC Ltd. is considering purchasing a new accounting information system (AIS) that costs $500,000. The system has an estimated useful life of five years and is expected to generate cost savings of $200,000 per year. The company uses a discount rate of 8% for capital budgeting decisions.

a) Calculate the net present value (NPV) of the AIS investment.
b) Determine whether the investment is acceptable based on the NPV result.
c) Calculate the payback period of the investment.
d) Determine whether the investment is acceptable based on the payback period.

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