We are considering the purchase of a $200 000 computer-based inventory management system. It will be depreciated straight-line to zero over its four-year life. It will be worth $30 000 at the end of that time. The system will save us

$60 000 before taxes in inventory-related costs. The relevant tax rate is 30 per cent.

As the new setup is more efficient than our existing one, we will be able to carry less total inventory and thus free up $45 000 in net working capital. What is the NPV at 16 per cent? What is the DCF return (the IRR) on this investment?