our firm is contemplating the purchase of a new $1,998,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $194,400 at the end of that time. You will be able to reduce working capital by $270,000 (this is a one-time reduction). The tax rate is 22 percent and your required return on the project is 22 percent and your pretax cost savings are $850,650 per year. Show equations using excel a. What is the NPV of this project? b. What is the NPV if the pretax cost savings are $612,450 per year? c. At what level of pretax cost savings would you be indifferent between accepting the project and not accepting it?
our firm is contemplating the purchase of a new $1,998,000 computer-based order entry system. The system will be
a. What is the NPV of this project?
b. What is the NPV if the pretax cost savings are $612,450 per year?
c. At what level of pretax cost savings would you be indifferent between accepting the project and not accepting it?
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