1.

Your firm is contemplating the purchase of a new $500,000 computer-based order entry system.

The system will be depreciated using the MACRS 3-year depreciation schedule. It will be worth

$50,000 at the end of the project in 5 years. You will save $50,000 before taxes per year in order

processing costs, and you will be able to reduce 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?