Stop Slicing Inc. is evaluating the purchase of a new computer system. System A will require an initial outlay of $100,000. Cash inflows are expected to be $10,000 at the end of year one, $20,000 at the end of year two, $30,000 at the end of year three, $30,000 at the end of year four, and $50,000 at the end of year five. System B will require an initial outlay of $50,000, with expected cash inflows of $10,000 at the end of year one, $20,000 at the end of year two, $15,000 at the end of year three, and $15,000 at the end of year four. The firm has a 10% required rate of return (the "hurdle rate"). Based upon net present value, and assuming only one system is needed, which computer system should SSI acquire? and explain the reason.

 

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