Your company is considering a new computer system that will initially cost $1 million. It will save $300,000 per year in inventory and receivables management costs. The system is expected to last for five years and will be depreciated using 3-year MACRS. The system is expected to have a salvage value of $50,000 at the end of year 5. There is no impact on net working capital. The marginal tax rate is 21%. The required return is 8%. Should you accept or reject the project?

OCF FOR YEARS 1 TO 5 Year) 1 2 3 4. 5 237000 237000 237000 237000 237000 After tax Cost Savings (300,000*.79%) Dep. 333,300 444,500 148,100 74,100 93,345 31,101 15561 TaxShield = Dep*.21 OCF 330,345 268101 252561 237000 Sal. Value 50,000 (10,500) Taxes SV-BV)*.21 NWC 0-- Total CF 330,345 268101 252561 276500