I

The more expensive system is also more efficient, resulting in lower annual costs. The net present values of these two systems can be estimated as follows -Net Present Value of Less Expensive System = - $20,000 - $8,000 [PV(A,10%,5 years)]

Net Present Value of More Expensive System = - $30,000 - $3,000 [PV(A,10%,5 years)]

The net present value of all costs is much lower with the second system making it the better choice.

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