Your firm is contemplating the purchase of a new $425,500 computer-based order entry system. The system...

Your firm is contemplating the purchase of a new $425,500 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $41,400 at the end of that time. You will be able to reduce working capital by $57,500 (this is a one-time reduction). The tax rate is 23 percent and your required return on the project is 18 percent and your pretax cost savings are $165,100 per year. a. What is the NPV of this project? b. What is the NPV if the pretax cost savings are $118,850 per year? c. At what level of pretax cost savings would you be indifferent between accepting the project and not accepting it?

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jeff jeffy answered 1 year ago

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