Your firm is contemplating the purchase of a new $666,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $64,800 at the end of that time. You will be able to reduce working capital by $90,000 (this is a one-time reduction). The tax rate is 32 percent and your required return on the project is 22 percent and your pretax cost savings are $302,300 per year.

Requirement 1:

What is the NPV of this project?

Requirement 2:

What is the NPV if the pretax cost savings are $217,650 per year?

Requirement 3:

At what level of pretax cost savings would you be indifferent between accepting the project and not accepting it?