Suppose your required return on project-pretax cost savings

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Reference no: EM13917609

Your firm is contemplating the purchase of a new $642,000 computer-based order entry system. The system will be depreciated straight-line to zero over its six-year life. It will be worth $46,000 at the end of that time. You will be able to reduce working capital by $41,000 at the beginning of the project. Working capital will revert back to normal at the end of the project. Assume the tax rate is 35 percent.

Requirement 1:

Suppose your required return on the project is 8 percent and your pretax cost savings are $196,000 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 8 percent and your pretax cost savings are $136,000 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 $

Reference no: EM13917609

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