Your firm is contemplating the purchase of a new $$425,000$ computer$-$based order entry system. The system will be depreciated straight$-$line to zero over its $5-$year life. It will be worth $$36,000$ at the end of that time. You will be able to reduce working capital by $$40,000$ at the beginning of the project. Working capital will revert back to normal at the end of the project. Assume the tax rate is $21$ percent.

What is the aftertax salvage value of the equipment?

Note: Do not round intermediate calculations and round your answer to the nearest whole number, e$.$g$.,32.$

Suppose your required return on the project is $9$ percent and your pretax cost savings are $$141,000$ per year.What is the annual OCF?

Note: Do not round intermediate calculations and round your answer to the nearest whole number, e$.$g$.,32.$

What is the NPV of the project?

Note: Do not round intermediate calculations and round your answer to $2$ decimal places, e$.$g$.,32\mathrm{.}16.$

Suppose your required return on the project is $9$ percent and your pretax cost savings are $$95,000$ per year. What is the annual OCF?

Note: Do not round intermediate calculations and round your answer to the nearest whole number, e$.$g$.,32.$

What is the NPV of the project?

Note: A negative answer should be indicated by a minus sign.Do not round intermediate calculations and round your answer to $2$ decimal places, e$.$g$.,32\mathrm{.}16.$

Answer rating: 100% (QA)

First lets calculate the aftertax salvage value of the equipment textAftertax Salvage Value textSalv... View the full answer