Question 5

MNO Enterprises is planning to implement a new software system with a project life of 4 years. The initial investment for the software is $300,000, and annual maintenance costs are $20,000. The new system is expected to save the company $150,000 per year in operating expenses. At the end of 4 years, the residual value of the software is estimated at $30,000. The corporate tax rate is 28%, and the appropriate discount rate is 7%.

Requirements:

1. Calculate the NPV of the project.
2. Determine the IRR.
3. Compute the payback period.
4. Assess the profitability index.
5. Decide if the project should be undertaken based on financial metrics.