ANSWER IN BOLD 18 Part A

B and C

Mi Saved Your firm is contemplating the purchase of a new $1,572,500 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $153,000 at the end of that time. You will be able to reduce working capital by $212,500 (this is a one-time reduction). The tax rate is 24 percent and your required return on the project is 21 percent and your pretax cost savings are $476,050 per year. a. What is the NPV of this project? b. What is the NPV if the pretax cost savings are $661,200 per year? NPV c. At what level of pretax cost savings would you be indifferent between accepting the project and not accepting it? Cost savings