Your firm is contemplating the purchase of a new $510,000 computer-based order entry
Your firm is contemplating the purchase of a new $510,000 computer-based order entry system. The system will fall in the MACRS five-year class although the project will last four years. It will be worth $64,000 at the end of the project year. You will save $218,000 before taxes per year in order processing costs, and you expect to require an initial investment in spare parts inventory of $21,000, along with an additional $3,000 in inventory for each succeeding year of the project. If the tax rate is 34% and its discount rate is 11%, what is the project NPV?
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