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Your firm is contemplating the purchase of a new $540,000 computer-based order entry system. The system...

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Finance

Your firm is contemplating the purchase of a new $540,000computer-based order entry system. The system will be depreciatedstraight-line to zero over its five-year life. It will be worth$68,000 at the end of that time. You will be able to reduce workingcapital by $93,000 (this is a one-time reduction). The tax rate is21 percent and the required return on the project is 9 percent. Ifthe pretax cost savings are $150,000 per year, what is the NPV ofthis project If the pretax cost savings are $115,000 per year, whatis the NPV of this project?

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