3. Bell Mountain Vineyards 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 cost of the system continues to decline. The Bell Mountain’s opportunity cost of capital is 12.1 percent, and the costs and values of investments made at different times in the future are as follows:

Year Cost Value of Future Savings (at time of purchase)
0 $5,000 $7,000
1 $4,600 $7,000
2 $4,200 $7,000
3 $3,800 $7,000
4 $3,400 $7,000
5 $3,000 $7,000

Calculate the NPV of each choice. (Round answers to the nearest whole dollar, e.g. 5,275.)
The NPV of each choice is:
NPV0 = $
NPV1 = $
NPV2 = $
NPV3 = $
NPV4 = $
NPV5 = $

Suggest when should Bell Mountain buy the new accounting system?
Bell Mountain should purchase the system in what year?

To calculate the Net Present Value (NPV) of each choice, you need to discount the future savings of each year back to the present value using the opportunity cost of capital.

Here's how you can calculate the NPV for each choice:

1. NPV0:
- Cost: $5,000
- Value of future savings at time of purchase: $7,000
- NPV0 = Value of future savings - Cost = $7,000 - $5,000 = $2,000

2. NPV1:
- Cost: $4,600
- Value of future savings at time of purchase: $7,000
- NPV1 = Value of future savings - Cost = $7,000 - $4,600 = $2,400

3. NPV2:
- Cost: $4,200
- Value of future savings at time of purchase: $7,000
- NPV2 = Value of future savings - Cost = $7,000 - $4,200 = $2,800

4. NPV3:
- Cost: $3,800
- Value of future savings at time of purchase: $7,000
- NPV3 = Value of future savings - Cost = $7,000 - $3,800 = $3,200

5. NPV4:
- Cost: $3,400
- Value of future savings at time of purchase: $7,000
- NPV4 = Value of future savings - Cost = $7,000 - $3,400 = $3,600

6. NPV5:
- Cost: $3,000
- Value of future savings at time of purchase: $7,000
- NPV5 = Value of future savings - Cost = $7,000 - $3,000 = $4,000

So, to summarize the NPV for each choice:
NPV0 = $2,000
NPV1 = $2,400
NPV2 = $2,800
NPV3 = $3,200
NPV4 = $3,600
NPV5 = $4,000

To determine when Bell Mountain should buy the new accounting system, look for the year where the NPV is the highest. In this case, NPV5 ($4,000) is the highest NPV among all the choices. Therefore, Bell Mountain should purchase the new accounting system in year 5.