What is the npv for system a

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Raptors Academy Inc. is considering two different basketball learning systems to be implemented in its offices. System A costs $450,000, has a 3-year life, has a salvage value of $30,000, and has pre-tax operating costs of $140,000 per year. System B costs $525,000, has a 4-year life, has a salvage value of $45,000, and has pre-tax operating costs of $150,000 per year. Both basketball machines belong to an asset class with a CCA rate of 20 percent per year. Your tax rate is 40 percent and your discount rate is 10 percent. Assuming that Learning Corp. will replace the systems at the end of their useful life, answer the following questions:

a) What is the NPV for System A?

b) What is the NPV for System B?

c) Which basketball learning system should Raptors Academy Inc. buy and why?

Reference no: EM132345940

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