Computer-based inventory management system

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Reference no: EM131497206

We are considering the purchase of a $350,000 computer-based inventory management system. It will be depreciated straight-line to zero over its five-year life. It will be worth $55,000 at the end of that time. The system will save us $95,000 before taxes in inventory-related costs. The relevant tax rate is 39%. Because the new setup is more efficient than our existing one, we will be able to carry less total inventory and thus free up $45,000 in net working capital. What is the NPV at 16% of discount rate?

Reference no: EM131497206

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