1. Your firm is contemplating the purchase of a new $545,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 7-year life. It will be worth $81,000 at the end of that time. You will save $193,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $52,000 at the beginning of the project. Working capital will revert back to normal at the end of the project. The tax rate is 22 percent.

What is the aftertax salvage value of the equipment? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Aftertax salvage value:

What is the annual operating cash flow? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

OFC:

2. An asset used in a four-year project falls in the five-year MACRS class (MACRS Table) for tax purposes. The asset has an acquisition cost of $8,700,000 and will be sold for $2,220,000 at the end of the project.

What is the book value of the equipment at the end of Year 4? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Book value: