Your firm is contemplating the purchase of a new 703000

Reference no: EM13620512

Your firm is contemplating the purchase of a new $703,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $68,400 at the end of that time. You will be able to reduce working capital by $95,000 (this is a one-time reduction). The tax rate is 31 percent and your required return on the project is 19 percent and your pretax cost savings are $293,150 per year. what is the NPV of the project? What is the NPV if the pretax cost savings are $211,050 per year? At what level of pretax cost savings would you be indifferent between accepting the project and not accepting it?

Reference no: EM13620512

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