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In: Finance

Your firm is contemplating the purchase of a new $2,164,500 computer-based order entry system. The system...

Your firm is contemplating the purchase of a new $2,164,500 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $210,600 at the end of that time. You will be able to reduce working capital by $292,500 (this is a one-time reduction). The tax rate is 32 percent and your required return on the project is 23 percent and your pretax cost savings are $725,450 per year.

  

Requirement 1:
What is the NPV of this project?
  (Click to select)   $-149,088.18   $-146,014.20   $-161,384.11   $-158,310.13   $-153,699.15

  

Requirement 2:
What is the NPV if the pretax cost savings are $1,007,600 per year?
  (Click to select)   $372,655.35   $384,180.78   $403,389.82   $364,971.74   $395,706.20

  

Requirement 3:

At what level of pretax cost savings would you be indifferent between accepting the project and not accepting it?

  (Click to select)   $781,909.49   $765,770.63   $686,658.55   $806,074.34   $846,378.06

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