Your firm is contemplating the purchase of a new $657,000 computer-based order entry system. The system will be depreciated straight-line to zero over its six-year life. It will be worth $51,000 at the end of that time. You will be able to reduce working capital by $46,000 at the beginning of the project. Working capital will revert back to normal at the end of the project. Assume the tax rate is 40 percent.
Requirement 1: (a) Suppose your required return on the project is 9 percent and your pretax cost savings are $201,000 per year. What is the NPV of the project? ($). Round your answer to 2 decimal places NPV $ Will you accept the project? Requirement 2Suppose your required return on the project is 9 percent and your pretax cost savings are $141,000 per year. What is the NPV of the project?