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Your firm is contemplating the purchase of a new $ 5 8 0 , 0 0 0 computer - based order entry system. The system
Your firm is contemplating the purchase of a new $ computerbased order entry system. The system will be depreciated straightline to zero over its fiveyear life. It will be worth $ at the end of that time. You will be able to reduce working capital by $ at the beginning of the project. Working capital will revert back to normal at the end of the project. The tax rate is percent and the required return on the project is percent.
a If the pretax cost savings are $ per year, what is the NPV of this project?
Note: Do not round intermediate calculations and round your answer to decimal places, eg
b If the pretax cost savings are $ per year, what is the NPV of this project?
Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to decimal places, eg
c At what level of pretax cost savings would you be indifferent between accepting the project and not accepting it
Note: Do not round intermediate calculations and round your answer to decimal places, eg
tablea NPVb NPVc Cost savings
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