Your firm is contemplating the purchase of a new $1,165,500 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $113,400 at the end of that time. You will be able to reduce working capital by $157,500 (this is a one-time reduction). The tax rate is 31 percent and your required return on the project is 18 percent and your pretax cost savings are $340,650 per year.

Requirement

1: What is the NPV of this project? (Click to select) Requirement

2: What is the NPV if the pretax cost savings are $473,100 per year? (Click to select) Requirement

3: At what level of pretax cost savings would you be indifferent between accepting the project and not accepting it?