Computer-based order entry system

Assignment Help Financial Management

Reference no: EM131088075

Your firm is contemplating the purchase of a new $620,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $68,000 at the end of that time. You will be able to reduce working capital by $83,000 (this is a one-time reduction). The tax rate is 34 percent and the required return on the project is 14 percent. If the pretax cost savings are $208,000 per year, what is the NPV of this project? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)

Reference no: EM131088075

Questions Cloud

Write out the security market line equation : Write out the Security Market Line (SML) equation and use it to calculate the required rate of return on each alternative. Compare the expected rates of return with the required rates of return. How do these perform against your predictions?

Estimate the likely standards of value creation : Looking out over the next decade, estimate the likely standards of value creation. How would you advise a company like IBM or Cisco to configure and coordinate its value chain to prosper in this environment? Would you give the same advice to a compan..

What is the expected year-end free cash flow : A corporation has a weighted avg cost of capital of 10.25% and its value of operation is $57.50 million. Free cash flow is expected to grow at a constant rate at 6.00% per year. What is the expected year-end free cash flow, FCF, in millions?

What is the companys new cost of equity : Kunitz Co. has no debt. Its cost of capital is 9.7 percent. Suppose Kunitz converts to a debt-equity ratio of 1. The interest rate on the debt is 6.8 percent. What is the company’s new cost of equity? What is its new WACC?

Computer-based order entry system : Your firm is contemplating the purchase of a new $620,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $68,000 at the end of that time. If the pretax cost savings ar..

Explain three errors in the quoted option prices calls puts : The share price of a stock is 25 today. Calls and puts on the stock have the following quotations. Identify and explain three errors in the quoted option prices Calls Puts

What are arithmetic and geometric returns for stock : A stock has had returns of −19.3 percent, 29.3 percent, 27.6 percent, −10.4 percent, 35.1 percent, and 27.3 percent over the last six years. What are the arithmetic and geometric returns for the stock?

Determine the profit from an index arbitrage : If the stock index is at 148, the three-month futures price is 151, the dividend yield is 5 percent and the interest rate is 8 percent, determine the profit from an index arbitrage if the stock ends up at 144 at expiration. (Ignore transaction costs...

Processes claims for medical flexible spending accounts : Your organization processes claims for medical flexible spending accounts (where employees of an organization pay pre-tax money into an account that can be used to pay medical expenses during the year). Identify at least 5 risks and assess them accor..

User Account

All Pages