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Your firm is contemplating the purchase of a new $485,000 computer-based order entry system. The system...

Your firm is contemplating the purchase of a new $485,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $35,000 at the end of that time. You will be able to reduce working capital by $60,000 (this is a one-time reduction). The tax rate is 24 percent and the required return on the project is 11 percent.

If the pretax cost savings are $150,000 per year, what is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)


Will you accept or reject the project?
  • Accept

  • Reject


If the pretax cost savings are $100,000 per year, what is the NPV of this project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)


Will you accept or reject the project?
  • Accept

  • Reject


At what level of pretax cost savings would you be indifferent between accepting the project and not accepting it? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

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