Question
Your firm is contemplating the purchase of a new $560,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year
Your firm is contemplating the purchase of a new $560,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $56,000 at the end of that time. You will be able to reduce working capital by $71,000 (this is a one-time reduction). The tax rate is 34 percent and the required return on the project is 14 percent.
If the pretax cost savings are $214,000 per year, what is the NPV of this project? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
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