Question
Your firm is contemplating the purchase of a new $1,443,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year
Your firm is contemplating the purchase of a new $1,443,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $140,400 at the end of that time. You will be able to reduce working capital by $195,000 (this is a one-time reduction). The tax rate is 23 percent and your required return on the project is 21 percent and your pretax cost savings are $603,250 per year.
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