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Your firm is contemplating the purchase of a new $ 7 5 8 , 5 0 0 System - based order entry system. The system

Your firm is contemplating the purchase of a new $758,500 System-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $73,800 at the end of that time. You will be able to reduce working capital by $102,500(this is a one-time reduction). The tax rate is 24 percent and your required return on the project is 18 percent and your pretax cost savings are $213,000 per year.
a. What is the NPV of this project?
b. What is the NPV if the pretax cost savings are $295,800 per year?
c. At what level of pretax cost savings would you be indifferent between accepting the project and not accepting it?

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