What level of pretax cost savings would you be indifferent

Assignment Help Financial Management

Reference no: EM131351437

Your firm is contemplating the purchase of a new $575,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $59,000 at the end of that time. You will be able to reduce working capital by $74,000 (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 $211,000 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.)

NPV $

Will you accept or reject the project?

Reject

If the pretax cost savings are $161,000 per year, what is the NPV of this project? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)

NPV $

Will you accept or reject the project?

Reject

At what level of pretax cost savings would you be indifferent between accepting the project and not accepting it?

Reference no: EM131351437

Questions Cloud

Graph the function pv c for c 505 : Study your results for parts b and c. If the pressure is halved, make a conjecture about the effect on the volume of gas.

Government budgeting and expenditures : Based on the second e-Activity that focuses on the Budget of the United States Government for Fiscal Year 2014 and 2015, analyze the president's messages and the three (3) budgets you selected. Discuss four (4) governmental expenditures that you b..

Were there role models for your habits : Analyze one of your habits. How did you develop this habit? Were there role models for this habit? Which people influenced the adoption of this habit?Why do you continue it? Has there been a time when you have attempted to break this habit?Use the ..

The average annual return on an index : The average annual return on an Index from 1996 to 2005 was 15.18 percent. The average annual T-bill yield during the same period was 3.88 percent. What was the market risk premium during these ten years?

What level of pretax cost savings would you be indifferent : Your firm is contemplating the purchase of a new $575,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $59,000 at the end of that time. If the pretax cost savings ar..

The craft of budgeting : From the first e-Activity, evaluate the relationship between Congress and the President and discuss two (2) reasons why the presidential duties may conflict with the role of Congress. Justify your response with examples.

Analysis of the change : Reflect on how the leadership introduced/announced the change and the reason for the change. Prepare a graphic that illustrates your analysis of the change and in 1,050 words, cover the following:

Devise a simple coding system to do a content analysis : Devise a simple coding system to do a content analysis of print advertisements in popular magazines. Begin by examining the ads to choose the content dimensions you wish to use (e.g., gender).

Income statements when evaluating commercial loan : Suppose you buy a stock for $28.66, receive a dividend of $1.6, and sell it for $48.69. What is your dividend yield? Why is it important to compute pro forma common size balance sheets and income statements when evaluating a commercial loan? Your ban..

User Account

All Pages