Your firm is contemplating the purchase of a new 1036000


Your firm is contemplating the purchase of a new $1,036,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $100,800 at the end of that time. You will be able to reduce working capital by $140,000 (this is a one-time reduction). The tax rate is 32 percent and your required return on the project is 22 percent and your pretax cost savings are $470,250 per year. 1) What is the NPV of this project? 2) What is the NPV if the pretax cost savings are $338,600 per year? 3) At what level of pretax cost savings would you be indifferent between accepting the project and not accepting it?

Request for Solution File

Ask an Expert for Answer!!
Financial Management: Your firm is contemplating the purchase of a new 1036000
Reference No:- TGS01411411

Expected delivery within 24 Hours