Question: Your firm is contemplating the purchase of a new $787,500 computer-based order entry system. The system will be depreciated straight-line to zero over its seven-year life. It will be worth $57,000 at the end of that time. You will be able to reduce working capital by $52,000 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: Suppose your required return on the project is 7 percent and your pretax cost savings are $207,000 per year. What is the NPV of the project? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
NPV $
Requirement 2: Suppose your required return on the project is 7 percent and your pretax cost savings are $147,000 per year. What is the NPV of the project? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places (e.g., 32.16).)
NPV $