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Business, 16.04.2021 01:00 kidwe2010

The mayor of Trenton is considering the purchase of a new computer system for the city's tax department. The system costs $75,000 and has an expected life of five years. The mayor estimates the following savings will result if the system is purchased: Year or Period Savings PV of $1 at 10% PV of an ordinary annuity at 10% 1 $ 20,000 0.909 0.909 2 25,000 0.826 1.736 3 30,000 0.751 2.487 4 15,000 0.683 3.170 5 12,000 0.621 3.791 Trenton uses a 10% discount rate for capital-budgeting decisions. A salesperson from a different computer company claims that his machine, which costs $85,000 and has an estimated service life of four years, will generate annual savings for the city of $32,000. If the discount rate is 10%, the net present value of this system would be:

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