Your firm is contemplating the purchase of a new $1,202,500 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $117,000 at the end of that time. You will be able to reduce working capital by $162,500 (this is a one-time reduction). The tax rate is 23 percent and your required return on the project is 22 percent and your pretax cost savings are $514,950 per year.

a. What is the NPV of this project?

b. What is the NPV if the pretax cost savings are $370,750 per year?

Your firm is contemplating the purchase of a new $1,202,500 computer-based order entry system. The system will be depreciated straight-line to zero over its 5 -year life. It will be worth $117,000 at the end of that time. You will be able to reduce working capital by $162,500 (this is a one-time reduction). The tax rate is 23 percent and your required return on the project is 22 percent and your pretax cost savings are $514,950 per year. a. What is the NPV of this project? b. What is the NPV if the pretax cost savings are $370,750 per year