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What is the NPV of the project

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    Assignment ID: FG133135172

    Question – Your firm is contemplating the purchase of a new $630,000 computer-based order entry system. The system will be depreciated straight-line to zero over its six-year life. It will be worth $42,000 at the end of that time. You will be able to reduce working capital by $37,000 at the beginning of the project. Working capital will revert back to normal at the end of the project. Assume the tax rate is 40 percent.

    Required –

    1: Suppose your required return on the project is 8 percent and your pretax cost savings are $192,000 per year. What is the NPV of the project?

    2: Suppose your required return on the project is 8 percent and your pretax cost savings are $132,000 per year. What is the NPV of the project?

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