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P$10-17$ Project Evaluation $[$LO$1]$

Your firm is contemplating the purchase of a new $$1,665,000$ computer$-$based order entry system. The system will be depreciated straight$-$line to zero over its $5-$year life. It will be worth $$162,000$ at the end of that time. You will be able to reduce working capital by $$225,000($this is a one$-$time reduction$).$ The tax rate is $23$ percent and your required return on the project is $18$ percent and your pretax cost savings are $$645,950$ per year.

a$.$ What is the NPV of this project? b$.$ What is the NPV if the pretax cost savings are $$465,100$ per year? c$.$ At what level of pretax cost savings would you be indifferent between accepting the project and not accepting it$?$