Blue Company, is trying to assess the feasibility of acquiring an accounting system for $10,000,000. The system is expected to reduce its salary cash expense by $2,000,000 per year. The system has a five-year life, it will be depreciated on a straight-line basis with no salvage value. Cost of capital is 15%. It is subject to 30% tax. (Present value factors should be rounded to four decimal places.) - What is the approximate internal rate of return of the investment? - What is the payback period of the investment?
Blue Company, is trying to assess the feasibility of acquiring an accounting system for $10,000,000. The system is expected to reduce its salary cash expense by $2,000,000 per year. The system has a five-year life, it will be depreciated on a straight-line basis with no salvage value. Cost of capital is 15%. It is subject to 30% tax. (Present value factors should be rounded to four decimal places.) - What is the approximate internal rate of return of the investment? - What is the payback period of the investment?
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 3P
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Blue Company, is trying to assess the feasibility of acquiring an accounting system for $10,000,000. The system is expected to reduce its salary cash expense by $2,000,000 per year. The system has a five-year life, it will be
- What is the approximate internal rate of
- What is the payback period of the investment?
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