Your firm is contemplating the purchase of a new $666,000 computer-based order entry system. The system...

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Finance

Your firm is contemplating the purchase of a new $666,000computer-based order entry system. The system will be depreciatedstraight-line to zero over its 5-year life. It will be worth$64,800 at the end of that time. You will be able to reduce workingcapital by $90,000 (this is a one-time reduction). The tax rate is34 percent and your required return on the project is 21 percentand your pretax cost savings are $215,150 per year.

Requirement 1:
What is the NPV of this project?
$-44,824.82 $-43,900.59 $-48,521.71 $-47,597.49$-46,211.15

Requirement 2:
What is the NPV if the pretax cost savings are $298,850 peryear?
$115,426.07 $121,197.38 $111,963.29 $109,654.77$118,888.86

Requirement 3:
At what level of pretax cost savings would you be indifferentbetween accepting the project and not accepting it?
$251,033.32 $247,407.84 $203,080.37 $227,125.38$239,079.35

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Your firm is contemplating the purchase of a new $666,000computer-based order entry system. The system will be depreciatedstraight-line to zero over its 5-year life. It will be worth$64,800 at the end of that time. You will be able to reduce workingcapital by $90,000 (this is a one-time reduction). The tax rate is34 percent and your required return on the project is 21 percentand your pretax cost savings are $215,150 per year. Requirement 1:What is the NPV of this project?$-44,824.82 $-43,900.59 $-48,521.71 $-47,597.49$-46,211.15 Requirement 2:What is the NPV if the pretax cost savings are $298,850 peryear?$115,426.07 $121,197.38 $111,963.29 $109,654.77$118,888.86 Requirement 3:At what level of pretax cost savings would you be indifferentbetween accepting the project and not accepting it?$251,033.32 $247,407.84 $203,080.37 $227,125.38$239,079.35