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our firm is contemplating the purchase of a new $485,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year
our firm is contemplating the purchase of a new $485,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $35,000 at the end of that time. You will be able to reduce working capital by $60,000 (this is a one-time reduction). The tax rate is 24 percent and the required return on the project is 11 percent. | ||
If the pretax cost savings are $150,000 per year, what is the NPV of this project?
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