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Your firm is contemplating the purchase of a new $888,000 computer-based order entry system. The system...

Your firm is contemplating the purchase of a new $888,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $86,400 at the end of that time. You will be able to reduce working capital by $120,000 (this is a one-time reduction). The tax rate is 34 percent and your required return on the project is 18 percent and your pretax cost savings are $264,550 per year.

Requirement 1:
What is the NPV of this project?
Requirement 2:
What is the NPV if the pretax cost savings are $367,450 per year?
Requirement 3:

At what level of pretax cost savings would you be indifferent between accepting the project and not accepting it?
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