Your firm is contemplating the purchase of a new $1,344,000 computer based order entry system. The system will be depreciated straight line to zero over its 5 year life. It will be worth $120,000 at the end of that time. You will save $528,000 before taxes per year in order processing costs and you will be able to reduce working capital by $177,994 this time reduction. Required: if the tax rate is 30 percent, what is the IRR for this project? Do not round your intermediate calculations.

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A:

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A: Step 1: Calculate the Annual DepreciationThe system costs $565,000 and will be depreciated to zero…

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A: NPV: Net present value is the present worth of the cash flows of the project. If the present worth…

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A: The question is related to Capital Budgeting. The details are given regading the same.

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