Your firm is contemplating the purchase of a new $625,000 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 $235,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $55,000 (this is a one-time reduction). If the tax rate is 35 percent, what is the IRR for this project? Answer on excel with formulas
Your firm is contemplating the purchase of a new $625,000 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 $235,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $55,000 (this is a one-time reduction). If the tax rate is 35 percent, what is the IRR for this project? Answer on excel with formulas
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 10P
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Question
Your firm is contemplating the purchase of a new $625,000 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 $235,000 before taxes per year in order
and you will be able to reduce working capital by $55,000 (this is a one-time reduction). If the tax rate is
35 percent, what is the
Answer on excel with formulas
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