Your firm is contemplating the purchase of a new $2,016,500 computer-based order entry system. The system...

Your firm is contemplating the purchase of a new $2,016,500 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $196,200 at the end of that time. You will be able to reduce working capital by $272,500 (this is a one-time reduction). The tax rate is 33 percent and your required return on the project is 20 percent and your pretax cost savings are $875,050 per year.

Requirement 1:

What is the NPV of this project?

(Click to select)$340,160.48$333,146.86$368,214.95$361,201.33$350,680.91

Requirement 2:

What is the NPV if the pretax cost savings are $630,050 per year?

(Click to select)$-147,239.48$-133,216.67$-144,434.92$-140,228.08$-136,021.23

Requirement 3:

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

(Click to select)$602,111.92$665,032.50$700,034.21$735,035.92$2,649.45

Expert Solution

jeff jeffy answered 1 year ago

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