• Joe & Dough Cafe is contemplating the purchase of a new $1,049,000 computer-based order entry system • The system will be depreciated straight-line to zero over its three-year life . It will be worth $156,300 at the end of that time You will save $423,500 before taxes per year in order processing costs • You will be able to reduce working capital by $115,764 (this is a one-time reduction). The net working capital will return to its original level when the project ends . The tax rate is 35 percent . Don't round intermediate calculations. Unless otherwise specified, enter your final answers as an integer without decimals or using 1,000 separators, e.g., enter 1234 for 1234.56. A negative number (e.g., a cash outflow) should be indicated with a "-" sign.
• Joe & Dough Cafe is contemplating the purchase of a new $1,049,000 computer-based order entry system • The system will be depreciated straight-line to zero over its three-year life . It will be worth $156,300 at the end of that time You will save $423,500 before taxes per year in order processing costs • You will be able to reduce working capital by $115,764 (this is a one-time reduction). The net working capital will return to its original level when the project ends . The tax rate is 35 percent . Don't round intermediate calculations. Unless otherwise specified, enter your final answers as an integer without decimals or using 1,000 separators, e.g., enter 1234 for 1234.56. A negative number (e.g., a cash outflow) should be indicated with a "-" sign.
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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Transcribed Image Text:• Joe & Dough Cafe is contemplating the purchase of a new $1,049,000 computer-based order entry system
• The system will be depreciated straight-line to zero over its three-year life
. It will be worth $156,300 at the end of that time
• You will save $423,500 before taxes per year in order processing costs
• You will be able to reduce working capital by $115,764 (this is a one-time reduction). The net working capital will return to
its original level when the project ends
. The tax rate is 35 percent
Don't round intermediate calculations. Unless otherwise specified, enter your final answers as an integer without decimals or
using 1,000 separators, e.g., enter 1234 for 1234.56. A negative number (e.g., a cash outflow) should be indicated with a "-"
sign.
1. What is the year EBIT: $
2. What is the yearly OCF: $
3. What is the change in NOWC in year 3: $
4. What is the after-tax terminal value: $
5. What is the internal rate of return for this three-year project: IRR =
two decimals, e.g., enter 1.23 for 1.234%.
%- Enter as a percent, rounded to
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