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Please show all work, thanks Your firm is contemplating the purchase of a new $763,000 computer-based order entry system. The system will be depreciated straight-line
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Your firm is contemplating the purchase of a new $763,000 computer-based order entry system. The system will be depreciated straight-line to zero over its seven-year life. It will be worth $50,000 at the end of that time. You will be able to reduce working capital by $45,000 at the beginning of the project. Working capital will revert back to normal at the end of the project. Assume the tax rate is 30 percent. Requirement 1: Suppose your required return on the project is 8 percent and your pretax cost savings are $200,000 per year. What is the NPV of the project? Requirement 2: Suppose your required return on the project is 8 percent and your pretax cost savings are $140,000 per year. What is the NPV of the projectStep by Step Solution
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