3 Book P10-17 Project Evaluation [LO1] 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? rences NPV b. What is the NPV if the pretax cost savings are $400,000 per year? NPV
3 Book P10-17 Project Evaluation [LO1] 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? rences NPV b. What is the NPV if the pretax cost savings are $400,000 per year? NPV
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![3
Book
P10-17 Project Evaluation [LO1]
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?
rences
NPV
b. What is the NPV if the pretax cost savings are $400,000 per year?
NPV](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2469e705-f5e7-4330-819f-7c0c990ba94a%2F94a44e83-ae26-45ee-b339-b055569b2d4f%2Fu13jbfh_processed.jpeg&w=3840&q=75)
Transcribed Image Text:3
Book
P10-17 Project Evaluation [LO1]
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?
rences
NPV
b. What is the NPV if the pretax cost savings are $400,000 per year?
NPV
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