Calculate the net present value of each investment project. Which project(s) should the firm accept? Use a 10% discount rate in evaluating the investment projects.

1. A warehouse can be expected to have a useful life of ten years, after which it will be obsolete with no scrap value. The warehouse involves $3,000,000 in capital cost that must be paid immediately. The warehouse will lower the firm's cost $400,000 for each of the first five years, and $500,000 per year thereafter.
2. The second project involves the acquisition of a computerized order system that would allow the firm's salespeople to link directly with the computer to place orders. The computerized network will require an initial capital cost of $1,000,000, but will save the firm $300,000 per year in support staff costs. Jackson's managers believe that the order system will be obsolete after five years.