Your firm is contemplating the purchase of a new $721,500 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $70,200 at the end of that time. You will be able to reduce working capital by $97,500 (this is a one-time reduction). The tax rate is 30 percent and your required return on the project is 17 percent and your pretax cost savings are $203,950 per year.

Requirement 1:

What is the NPV of this project?

(Click to select) $-49,279.09 $-48,263.03 $-53,343.34 $-52,327.28 $-50,803.19

Requirement 2:

What is the NPV if the pretax cost savings are $283,300 per year?

(Click to select) $126,904.50 $120,559.27 $130,711.63 $133,249.72 $123,097.36

Requirement 3:

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

(Click to select) $237,966.36 $201,934.24 $226,634.63 $242,193.79 $215,302.90