Your firm is contemplating the purchase of a new $530,000 computer - based order entry system. The system will be depreciated straight line to zero over its five-year life. It will be worth $50,000 at the end of that time. You will save $310, 000 before taxes per year in order processing costs, and you will be able to reduce working capital by $65,000 (this is a one- time reduction). If the tax rate is 25 percent, what is the IRR for this project?
Your firm is contemplating the purchase of a new $530,000 computer - based order entry system. The system will be depreciated straight line to zero over its five-year life. It will be worth $50,000 at the end of that time. You will save $310, 000 before taxes per year in order processing costs, and you will be able to reduce working capital by $65,000 (this is a one- time reduction). If the tax rate is 25 percent, what is the IRR for this project?
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 5P
Related questions
Question
![Your firm is contemplating the purchase of a
new $530, 000 computer - based order
entry system. The system will be
depreciated straight line to zero over its
five-year life. It will be worth $50, 000 at
the end of that time. You will save $310, 000
before taxes per year in order processing
costs, and you will be able to reduce
working capital by $65,000 (this is a one-
time reduction). If the tax rate is 25
percent, what is the IRR for this project?
-](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F01b5e09c-212a-4baf-898d-4fd33fbdaa8d%2F93cfcfb6-ecf9-4816-8ffb-bacf429853ee%2Fhewwklf_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Your firm is contemplating the purchase of a
new $530, 000 computer - based order
entry system. The system will be
depreciated straight line to zero over its
five-year life. It will be worth $50, 000 at
the end of that time. You will save $310, 000
before taxes per year in order processing
costs, and you will be able to reduce
working capital by $65,000 (this is a one-
time reduction). If the tax rate is 25
percent, what is the IRR for this project?
-
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