Homework Help is Here – Start Your Trial Now!
Business
Finance
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.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 10P
See similar textbooks
icon
Related questions
Question
100%

Your 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.

Expert Solution
steps

Step by step

Solved in 3 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Similar questions
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Principles of Accounting Volume 2
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Cornerstones of Cost Management (Cornerstones Ser…
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Managerial Accounting: The Cornerstone of Busines…
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Excel Applications for Accounting Principles
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning
SEE MORE TEXTBOOKS