14. Project Evaluation [LO1] Your firm is contemplating the purchase of a new $580,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $60,000 at the end of that time. You will save $210,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $75,000 (this is a one-time reduc- tion). If the tax rate is 35 percent, what is the IRR for this project?

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Author:Steven S. Zumdahl, Susan A. Zumdahl, Donald J. DeCoste
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14. Project Evaluation [LO1] Your firm is contemplating the purchase of a new
$580,000 computer-based order entry system. The system will be depreciated
straight-line to zero over its five-year life. It will be worth $60,000 at the end of that
time. You will save $210,000 before taxes per year in order processing costs, and
you will be able to reduce working capital by $75,000 (this is a one-time reduc-
tion). If the tax rate is 35 percent, what is the IRR for this project?
Transcribed Image Text:14. Project Evaluation [LO1] Your firm is contemplating the purchase of a new $580,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $60,000 at the end of that time. You will save $210,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $75,000 (this is a one-time reduc- tion). If the tax rate is 35 percent, what is the IRR for this project?
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