Your firm is contemplating the purchase of a new $500,000 computer-based order entry system. The system will be depreciated using the MACRS 5-year depreciation schedule. It will be worth $80,000 at the end of the project in 6 years. You will save $50,000 before taxes per year in order processing costs, and you will be able to reduce net working capital by $70,000. You will also increase sales by $100,000 per year for the first year and this number will increase by 3% per year. If the tax rate is 30 percent, and the required rate of return is 10%, what is the NPV of this project?

Run a scenario analysis for the above problem using the following scenarios. (Assume the answers from question 1 represent the base scenario)

	Good (Prob 30%)	Bad (Prob 30%)
Initial Cost	$450,000	$575,000
Salvage	$60,000	$25,000
Savings	$70,000	$40,000
Sales growth rate	5%	-1%
Tax Rate	26%	35%