Davis plumbing is considering updating its current manual

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Reference no: EM13388969

Davis Plumbing is considering updating its current manual accounting system with a high end electronic system. While the new accounting system would save the company money, the initial purchase cost of the system continues to decline. The company's opportunity cost of capital or discount rate is 10 percent. The initial investment costs and annual savings made at different times in the future are shown below:

Year Initial Investment Savings Per Year

0 5,000 7,000

1 4,500 7,000

2 4,000 7,000

3 3,600 7,000

4 3,300 7,000

5 3,100 7,000

When should Davis replace the system to have the highest present value of the NPV?

Reference no: EM13388969

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