Your firm is contemplating the purchase of a new $795,500 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $77,400 at the end of that time. You will be able to reduce working capital by $107,500 (this is a one-time reduction). The tax rate is 35 percent and your required return on the project is 21 percent and your pretax cost savings are $359,600 per year.

Requirement 1: What is the NPV of this project?

2: What is the NPV if the pretax cost savings are $258,900 per year?

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