Your firm is contemplating the purchase of a new $605,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $65,000 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 $80,000 (this is a one-time reduction). If the tax rate is 25 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
Your firm is contemplating the purchase of a new $605,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $65,000 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 $80,000 (this is a one-time reduction). If the tax rate is 25 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
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 $605,000 computer-based order entry
system. The system will be depreciated straight-line to zero over its five-year life. It will
be worth $65,000 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 $80,000
(this is a one-time reduction). If the tax rate is 25 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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In the step 2 calculation of IRR, how do you find the tax amount of 114000? thank you.
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