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(Ignore income taxes in this problem.) Five years ago, the City of Paranoya spent $30,000 to purchase a computerized radar system called W.A.S.T.E. (Watching Aliens Sent To Earth). Recently, a sales rep from W.A.S.T.E. Radar Company told the city manager about a new and improved radar system that can be purchased for $50,000. The rep also told the manager that the company would give the city $10,000 in trade on the old system. The new system will last 10 years. The old system will also last that long but only if a $4,000 upgrade is done in 5 years. The manager assembled the following information to use in the decision regarding which system is more desirable:Old SystemNew SystemCost of radar system…………………..$30,000$50,000Current salvage value…………………. $10,000–Salvage value in 10 years……………..$5,000$8,000Annual operating costs………………..$34,000$29,000Upgrade required in 5 years…………$4,000–Discount rate……………………………..14%14%Required:What is the City of Paranoya’s net present value for the decision described above? Use the total cost approach.
Question:3. (Ignore income taxes in this problem.) Five years ago, the City of Paranoya spent $30,000 to purchase acomputerized radar system called W.A.S.T.E. (Watching Aliens Sent To Earth)….
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