Problem 9-15 Project Evaluation [LO 2]

Your firm is contemplating the purchase of a new $636,000 computer-based order entry system. The system will be depreciated straight-line to zero over its six-year life. It will be worth $44,000 at the end of that time. You will be able to reduce working capital by $39,000 at the beginning of the project. Working capital will revert back to normal at the end of the project. Assume the tax rate is 30 percent.

Requirement 1:

Suppose your required return on the project is 10 percent and your pretax cost savings are $194,000 per year. What is the NPV of the project? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

NPV

$

Requirement 2:

Suppose your required return on the project is 10 percent and your pretax cost savings are $134,000 per year. What is the NPV of the project? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places (e.g., 32.16).)

NPV

$