Your firm is contemplating the purchase of a new $388,500 computer-based order entry system. The system will be depreciated straight-line to zero…

Your firm is contemplating the purchase of a new $388,500 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $37,800 at the end of that time. You will be able to reduce working capital by $52,500 (this is a one-time reduction). The tax rate is 30 percent and your required return on the project is 16 percent and your pretax cost savings are $106,850 per year.

A) What is the NPV of this project?

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