Question

Help System Announcements (1 Unread) BACK NEXT PRINTER VERSION Problem 9.17 Emporia Mills management is evaluating two alternative heating systems. Costs and projected energy savings are given in the following table. The firm uses 13.14 percent to discount such project cash flows. Year System 100 System 200 $-1,861,300 268,310 0 s-1,766,400 720,700 1 2. 609,730 769,240 1,057,400 569,000 634,500 361,900 4 What is the NPV of the systems? (Enter negative amounts using negative sign e.g. -45.25. Do not round dis count factors. Round answers to 0 decimal places, e.g. 5,275.) NPV of system 100 is NPV of system 200 is $ Which system should be chosen? Emporia should choose Click if you would like to Show Work for this question: Open Show Work LINK TO TEXT VIDEO: CONCEPTS IN ACTION

Answer 1

Calculation of NPV
			13.14%
Year	System 100	System 200	PV factor	Present values-System 100	Present values-System 200
	A	B	C	D=A*C	E=B*C
0	-1,861,300	-1,766,400	1.0000	-1,861,300	-1,766,400
1	268,310	720,700	0.8839	237,149	636,998
2	609,730	569,000	0.7812	476,327	444,508
3	769,240	634,500	0.6905	531,145	438,110
4	1,057,400	361,900	0.6103	645,319	220,863
		Net Present Value		$             28,640	$     (25,920)
Since NPV of System 100 is positive, hence this system should be chosen.