Able to reduce working capital

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Your firm is contemplating the purchase of a new $595,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $63,000 at the end of that time. You will be able to reduce working capital by $78,000 (this is a one-time reduction). The tax rate is 35 percent and the required return on the project is 15 percent. If the pretax cost savings are $203,000 per year, what is the NPV of this project?

Reference no: EM13947248

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Able to reduce working capital : Your firm is contemplating the purchase of a new $595,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $63,000 at the end of that time. You will be able to reduce wo..

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