Your firm is contemplating the purchase of a new $657,000 computer-based order e

Question

Your firm is contemplating the purchase of a new $657,000 computer-based order entry system. The system will be depreciated straight-line to zero over its six-year life. It will be worth $51,000 at the end of that time. You will be able to reduce working capital by $46,000 at the beginning of the project. Working capital will revert back to normal at the end of the project. Assume the tax rate is 40 percent. Requirement 1: (a) Suppose your required return on the project is 9 percent and your pretax cost savings are $201,000 per year. What is the NPV of the project? (Do not include the dollar sign ($). Round your answer to 2 decimal places (e.g., 32.16).) NPV $ (b) Will you accept the project? Requirement 2: (a) Suppose your required return on the project is 9 percent and your pretax cost savings are $141,000 per year. What is the NPV of the project? (Do not include the dollar sign ($). Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places (e.g., 32.16).) NPV $

Explanation / Answer

This might help...

https://docs.google.com/viewer?a=v&q=cache:fp2W-O5KXaAJ:www.acc.ncku.edu.tw/chinese/faculty/mingyuan/myweb11/AMBA/????/Q&P/Chapter 10_Q&P.ppt+&hl=en&gl=in&pid=bl&srcid=ADGEESgSlJcl4maV5aeIQuAxyDOYOhj0Ed84VmgaMwIuhUQSBapyI1wsAL9ueAk87xWqWVKNdGpyA8N4vrT3aGbiuY8Uh8zIGa7HnfV1vD7GIiOb3FTtYHZHR1ro7NCpwxH5FCQz8DPO&sig=AHIEtbTSQN97BRq-C2FysJsd8lclV-c93w

question 13

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.