Your firm is contemplating the purchase of a new $540,000 computer-basedorder entry system. The system will be depreciated straight-line to zero overits five-year life. It will be worth $68,000 at the end of that time. You will beable to reduce working capital by $93,000 (this is a one-time reduction). Thetax rate is 21 percent and the required return on the project is 9 percent.If the pretax cost savings are $150,000 per year, what is the NPV of thisproject? (Do not round intermediate calculations and round your answer to 2decimal places, e.g., 32.16.)NPVWill you accept or reject the project?AcceptRejectIf the pretax cost savings are $115,000 per year, what is the NPV of thisproject? (A negative answer should be indicated by a minus sign. Do notround intermediate calculations and round your answer to 2 decimal places,e.g., 32.16.)NPVWill you accept or reject the project?RejectAcceptAt what level of pretax cost savings would you be indifferent betweenaccepting the project and not accepting it? (Do not round intermediatecalculations and round your answer to 2 decimal places, e.g., 32.16.)Costsavings

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Description: Your firm is contemplating the purchase of a new $540,000 computer-basedorder entry system. The system will be depreciated straight-line to zero overits five-year life. It will be worth $68,000 at the end of that time. You will beable to reduce work

Net Present Value: It is usually used when a decision has to be made about acceptance or rejection…

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Your firm is contemplating the purchase of a new $540,000 order entry system. The system will be depreciated straight-li its five-year life. It will be worth $68,000 at the end of that ti able to reduce working capital by $93,000 (this is a one-time tax rate is 21 percent and the required return on the project is 9 If the pretax cost savings are $150,000 per year, what is t project? (Do not round intermediate calculations and round y

Your firm is contemplating the purchase of a new $540,000 order entry system. The system will be depreciated straight-li its five-year life. It will be worth $68,000 at the end of that ti able to reduce working capital by $93,000 (this is a one-time tax rate is 21 percent and the required return on the project is 9 If the pretax cost savings are $150,000 per year, what is t project? (Do not round intermediate calculations and round y

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 15E: Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided...

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