In the previous problem, suppose your required return on the project is 20 percent, your pre-tax cost savings are now $300,000 per year, and the machine can be depreciated at 30 percent (Class 10). Will you accept the project? What if the pre-tax savings are only $240,000 per year? At what level of pre-tax cost savings would you be indifferent between accepting the project and not accepting it?

Data from previous question

Your firm is contemplating the purchase of a new $720,000 million computer-based order entry system. The PVCCATS is $260,000, and the machine will be worth $280,000 at the end of the five-year life of the system. You will save $350,000 before taxes per year in order processing costs and you will be able to reduce working capital by $110,000 (this is a one-time reduction).