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Your firm is contemplating the purchase of a new $1,424,500 computer-based order entry system. The system...

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Finance

Your firm is contemplating the purchase of a new $1,424,500computer-based order entry system. The system will be depreciatedstraight-line to zero over its 5-year life. It will be worth$138,600 at the end of that time. You will be able to reduceworking capital by $192,500 (this is a one-time reduction). The taxrate is 31 percent and your required return on the project is 17percent and your pretax cost savings are $562,650 per year.

  

Requirement 1:
What is the NPV of this project?
(Click toselect)$241,004.99$236,035.81$260,881.69$255,912.52$248,458.75

  

Requirement 2:
What is the NPV if the pretax cost savings are $405,100 peryear?
(Click toselect)$-99,340.57$-94,373.54$-102,320.79$-96,360.35$-104,307.60

  

Requirement 3:

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

(Click toselect)$450,100.39$17,132.49$398,888.27$427,595.37$472,605.41


rev: 09_18_2012, 04_09_2016_QC_CS-48481

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