Your firm is contemplating the purchase of a new $1,498,500 computer-based order entry system. The system...

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Your firm is contemplating the purchase of a new $1,498,500computer-based order entry system. The system will be depreciatedstraight-line to zero over its 5-year life. It will be worth$145,800 at the end of that time. You will be able to reduceworking capital by $202,500 (this is a one-time reduction). The taxrate is 24 percent and your required return on the project is 16percent and your pretax cost savings are $554,650 per year.
a. What is the NPV of this project?
b. What is the NPV if the pretax cost savingsare $399,350 per year?
c. At what level of pretax cost savings wouldyou be indifferent between accepting the project and not acceptingit?

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Your firm is contemplating the purchase of a new $1,498,500computer-based order entry system. The system will be depreciatedstraight-line to zero over its 5-year life. It will be worth$145,800 at the end of that time. You will be able to reduceworking capital by $202,500 (this is a one-time reduction). The taxrate is 24 percent and your required return on the project is 16percent and your pretax cost savings are $554,650 per year.a. What is the NPV of this project?b. What is the NPV if the pretax cost savingsare $399,350 per year?c. At what level of pretax cost savings wouldyou be indifferent between accepting the project and not acceptingit?