10.5: Blanda Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. If the firm uses a 9 percent discount rate for their production systems, in which system should the firm invest?
Year System 1 System 2
0 −$15,000 −$45,000
1 15,000 32,000
2 15,000 32,000
3 15,000 32,000
This question was asked on Jul 07, 2012 and answered on Jul 08, 2012.
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