What level of pretax cost savings

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Reference no: EM131065590

Your firm is contemplating the purchase of a new $1,036,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $100,800 at the end of that time. You will be able to reduce working capital by $140,000 (this is a one-time reduction). The tax rate is 32 percent and your required return on the project is 22 percent and your pretax cost savings are $470,250 per year. 1) What is the NPV of this project? 2) What is the NPV if the pretax cost savings are $338,600 per year? 3) At what level of pretax cost savings would you be indifferent between accepting the project and not accepting it?

Reference no: EM131065590

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