NPV of the Project Assignment

Your firm is contemplating the purchase of a new $666,000 computer-based order entry system. The system will be depreciated straight-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 working capital by $90,000 (this is a one-time reduction). The tax rate is 33 percent and your required return on the project is 17 percent and your pretax cost savings are $191,700 per year.
Requirement 1:
What is the NPV of this project?
$-44,325.31 $-43,411.39 $-47,981.01 $-47,067.09 $-45,696.20
Requirement 2:
What is the NPV if the pretax cost savings are $266,250 per year?
$119,811.66 $110,683.15 $117,529.53 $108,401.02 $114,106.34
Requirement 3:
At what level of pretax cost savings would you be indifferent between accepting the project and not accepting it?
$236,424.95 $223,668.78 $186,677.98 $213,017.88 $202,366.99

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