Your firm is contemplating the purchase of a new $703,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $68,400 at the end of that time. You will be able to reduce working capital by $95,000 (this is a one-time reduction). The tax rate is 33 percent and your required return on the project is 21 percent and your pretax cost savings are $313,200 per year.

Requirement 1:

What is the NPV of this project?

a $119,118.08

b$116,662.04

c$128,942.25

d$126,486.21

e$122,802.14

Requirement 2:

What is the NPV if the pretax cost savings are $225,500 per year?

a$-46,669.48 b $-51,582.06 c $-50,599.54 d $-47,652.00 e $-49,125.77

Requirement 3:

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

a $214,272.48

b$250,558.93

c$540.42

d$263,086.88

e$238,030.99