Question

Emporia Mills management is evaluating two alternative heating systems. Costs and projected energy savings are given in the following table. The firm uses 12.27 percent to discount such project cash flows.

Year		System 100		System 200
0		$-2,053,200		$-1,741,800
1		314,410		701,900
2		520,830		460,300
3		529,940		614,300
4		656,200		314,000

What is the NPV of the systems? (Enter negative amounts using negative sign e.g. -45.25. Do not round discount 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

both systemsSystem 100Neither systemSystem 200

Answer 1