Your firm is contemplating the purchase of a new $535,000 computer - based order entry system. Thesystem will be depreciated straight-line to zero over itsfive-year life. It will be worth $30,000 at the end of thattime. You will save $165,000 before taxes per year inorder processing costs, and you will be able to reduceworking capital by $60,000 at the beginning of theproject. Working capital will revert back to normal at theend of the project. If the tax rate is 24 percent, what isthe IRR for this project? Can someone explain onfinancial calculator?

Internal rate of return(IRR) is the discount rate that makes NPV of investment zero. IRR can be…

Answered: Your firm is contemplating the purchase…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 5P

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Caduceus Company is considering the purchase of a new piece of factory equipment that will cost $565,000 and will generate $135,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return In Excel, see Appendix C.
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Your firm is contemplating the purchase of a new $ 535,000 computer-based order entry system. The system will be depreciated straight-line to zero over it five year life. It will be worth $30,000 at the end of th time. You will save $165,000 before taxes per year in