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The system is expected to bring annual benefits

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Reference no: EM13938814

MRE Sales is looking to acquire an ERP and has asked for your assistance. The company can purchase the system outright for $120,000 plus 5% sales tax, and delivery and install charges of $2,000. The ERP is expected to last 5 years and have a salvage value of $8,000. The company will use straight line depreciation over the 5 year life. Its income tax rate is 40%. The company's cost of capital is 12%. The system is expected to bring annual benefits of $35,000 over the 5 year period. Showing all calculations in Excel:

a. Compute the NPV of the project.

b. Compute its payback period.

Reference no: EM13938814

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