Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Your firm is contemplating the purchase of a new $657,000 computer-based order entry system. The system will be depreciated straight-line to zero over its six-year

image text in transcribed

Your firm is contemplating the purchase of a new $657,000 computer-based order entry system. The system will be depreciated straight-line to zero over its six-year life. It will be worth $51,000 at the end ofthat time. You will be able to reduce working capital by $46,000 at the beginning of the project. Workingcapital will revert back to normal at the end of the project. Assume the tax rate is 40 percent. Required: What is the after tax salvage value of the equipment? (Do not round intermediate calculations. Round your answer to the nearest whole number (e.g., 32).) After tax salvage value $ Suppose your required return on the project is 9 percent and your pretax cost savings are $201,000 per year. What is the annual OCF? (Do not round intermediate calculations. Round your answer to the nearest whole number (e.g., 32).)OCF $______What is the NPV of the project? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) NPV $ Suppose your required return on the project is 9 percent and your pretax cost savings are $141,000 per year. What is the annual OCF? (Do not round intermediate calculations. Round your answer to the nearest whole number (e.g., 32).) OCF $________What is the NPV of the project? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) NPV $________

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Trade Union Finance

Authors: Marick F. Masters, Raymond Gibney

1st Edition

1032371382, 978-1032371382

More Books

Students also viewed these Finance questions

Question

Develop skills for building positive relationships.

Answered: 1 week ago

Question

Describe techniques for resolving conflicts.

Answered: 1 week ago

Question

Give feedback effectively and receive it appropriately.

Answered: 1 week ago