14. Project Evaluation [LO1] Your firm is contemplating the purchase of a new$580,000 computer-based order entry system. The system will be depreciatedstraight-line to zero over its five-year life. It will be worth $60,000 at the end of thattime. You will save $210,000 before taxes per year in order processing costs, andyou will be able to reduce working capital by $75,000 (this is a one-time reduc-tion). If the tax rate is 35 percent, what is the IRR for this project?

Internal rate of return refers to the return that is being earned by the investors over the amount…

Answered: oject our firm is contemplating the…

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 $540,000 computer - based order entry system. The system will be depreciated straight - line to zero over its five - year life. It will be worth $52, 000 at the end of that time. You will save $300,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $67,000 (this is a one - time reduction). If the tax rate is 23 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.)
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Your firm is contemplating the purchase of a new $540,000 computer - based order entry system. The system will be depreciated straight - line to zero over its five-year life. It will be worth $52,000 at the end of that time. You will save $300,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $67,000 (this is a one-time reduction). If the tax rate is 23 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.)
Your firm is contemplating the purchase of a new $540,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $68,000 at the end of that time. You will be able to reduce working capital by $93,000 (this is a one-time reduction). The tax rate is 21 percent and the required return on the project is 9 percent. If the pretax cost savings are $150,000 per year, what is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV Will you accept or reject the project? Accept Reject If the pretax cost savings are $115,000 per year, what is the NPV of this project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV Will you accept or reject the project? Reject Accept At what level of pretax cost savings would you be indifferent between accepting the…
Please answer fast i give you upvote.
Suppose we are thinking about replacing an old computer with a new one. The old one cost us $1,860,000; the new one will cost, $2,261,000. The new machine will be depreciated straight-line to zero over its five-year life. It will probably be worth about $585,000 after five years. The old computer is being depreciated at a rate of $432,000 per year. It will be completely written off in three years. If we don't replace it now, we will have to replace it in two years. We can sell it now for $639,000; in two years, it will probably be worth $189,000. The new machine will save us $423,000 per year in operating costs. The tax rate is 25 percent, and the discount rate is 12 percent. a-1. Calculate the EAC for the the old computer and the new computer. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) a-2. What is the NPV of the decision to replace the computer now? (A negative answer should…
Your firm is contemplating the purchase of a new $515,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $53,000 at the end of that time. You will save $153,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $78,000 (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 %
Market Top Investors, Inc., is considering the purchase of a $345,000 computer with an economic life of five years. The computer will be fully depreciated over five years using the straight-line method, at which time it will be worth $60,000. The computer will replace two office employees whose combined annual salaries are $86,000. The machine will also immediately lower the firm's required net working capital by $75,000. This amount of net working capital will need to be replaced once the machine is sold. The corporate tax rate is 25 percent. The appropriate discount rate is 8 percent. Calculate the NPV of this project. show work step by step
Your firm is contemplating the purchase of a new $435,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 6-year life. It will be worth $54,000 at the end of that time. You will save $157,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $43,000 at the beginning of the project. Working capital will revert back to normal at the end of the project. If the tax rate is 23 percent, what is the IRR for this project? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. IRR 25.73 %
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