P$10-17$ Project Evaluation $[$LO$1]$

Your firm is contemplating the purchase of a new $$1,424,500$ computer$-$based order entry system. The system will be depreciated straight$-$line to zero over its $5-$year life. It will be worth $$138,600$ at the end of that time. You will be able to reduce working capital by $$192,500($this is a one$-$time reduction$).$ The tax rate is $24$ percent and your required return on the project is $18$ percent and your pretax cost savings are $$555,550$ per year.

a$.$ What is the NPV of this project?

NPV

b$.$ What is the NPV if the pretax cost savings are $$400,000$ per year?

NPV