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Granny's Choice - NPV

A food company called 'Granny's Choice' wants to introduce a new computer system for its perishable products warehouse. The costs and benefits are as follows:
Years Costs Benefits

1 33,000 21,000
2 34,600 26,200
3 36,300 32,700
4 38,100 40,800
5 40,000 51,000
6 42,000 63,700

a)Given a discount rate of 8 percent (0.08), perform present value analysis on the data for 'Granny's Choice'.
(Please use the formula
1
(1+i)n to find the multipliers for years 1to 6, where 'i' represents the discount rate and 'n' represents the number of periods).

b) What is your recommendation for 'Granny's Choice'?

Solution Preview

Please see the attached file.

b) Since the Net Present Value ...

$2.19