Your firm is contemplating the purchase of a new $620,000 computer - based order entry system. The system will be depreciated straight - line to zero over its 5-year life. It will be worth $101,000 at the end of that time. You will save $194,000 before taxes per year in order processing costs, and you will be able to reduce working capital by S 116,000 (this is a one time reduction). If the tax rate is 24 percent, what is the IRR for this project?

Your firm is contemplating the purchase of a new $620,000 computer - based order entry system. The system will be depreciated straight - line to zero over its 5-year life. It will be worth $101,000 at the end of that time. You will save $194,000 before taxes per year in order processing costs, and you will be able to reduce working capital by S 116,000 (this is a one time reduction). If the tax rate is 24 percent, what is the IRR for this project?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 17EB: Caduceus Company is considering the purchase of a new piece of factory equipment that will cost...

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