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Your firm is contemplating the purchase of a new $2,072,000 computer-based order entry system. The system...

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Finance

Your firm is contemplating the purchase of a new $2,072,000computer-based order entry system. The system will be depreciatedstraight-line to zero over its 5-year life. It will be worth$201,600 at the end of that time. You will be able to reduceworking capital by $280,000 (this is a one-time reduction). The taxrate is 31 percent and your required return on the project is 22percent and your pretax cost savings are $933,900 per year.Requirement 1: What is the NPV of this project? Requirement 2: Whatis the NPV if the pretax cost savings are $672,400 per year?Requirement 3: At what level of pretax cost savings would you beindifferent between accepting the project and not accepting it?

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