our firm is contemplating the purchase of a new $500,000 computer-based order entry system. The system will be depreciated using the MACRS 5-year depreciation schedule. It will be worth $80,000 at the end of the project in 6 years. You will save $50,000 before taxes per year in order processing costs, and you will be able to reduce net working capital by $70,000. You will also increase sales by $100,000 per year for the first year and this number will increase by 3% per year. If the tax rate is 30 percent, and the required rate of return is 10%, what is the NPV of this project? Must be done in excel and use cell referencing.
our firm is contemplating the purchase of a new $500,000 computer-based order entry system. The system will be depreciated using the MACRS 5-year depreciation schedule. It will be worth $80,000 at the end of the project in 6 years. You will save $50,000 before taxes per year in order processing costs, and you will be able to reduce net working capital by $70,000. You will also increase sales by $100,000 per year for the first year and this number will increase by 3% per year. If the tax rate is 30 percent, and the required rate of return is 10%, what is the NPV of this project? Must be done in excel and use cell referencing.
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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