Computer-based order entry system

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Your firm is contemplating the purchase of a new $666,000 computer-based order entry system. The system will be depreciated straight-line to zero over its six-year life. It will be worth $54,000 at the end of that time. You will be able to reduce working capital by $49,000 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 8 percent and your pretax cost savings are $204,000 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).) Requirement 2: Suppose your required return on the project is 8 percent and your pretax cost savings are $144,000 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).)

Reference no: EM131068606

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