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Problem:

Your firm is contemplating the purchase of a new $615,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $67,000 at the end of that time. You will be able to reduce working capital by $82,000 (this is a one-time reduction). The tax rate is 30 percent and the required return on the project is 16 percent.

Required:

If the pretax cost savings are $207,000 per year, what is the NPV of this project?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91162451

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