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Your firm is contemplating the purchase of a new $655,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $129,000 at the end of that time. You will save $208,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $144,000 (this is a one-time reduction). If the tax rate is 21 percent, what is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) IDD

Your firm is contemplating the purchase of a new $655,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $129,000 at the end of that time. You will save $208,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $144,000 (this is a one-time reduction). If the tax rate is 21 percent, what is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) IDD

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Your firm is contemplating the purchase of a new $655,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $129,000 at the end of that time. You will save $208,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $144,000 (this is a one-time reduction). If the tax rate is 21 percent, what is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) IRR %
Transcribed Image Text:Your firm is contemplating the purchase of a new $655,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $129,000 at the end of that time. You will save $208,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $144,000 (this is a one-time reduction). If the tax rate is 21 percent, what is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) IRR %
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