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Your firm is contemplating the purchase of a new $495,000 computer-based order entry system the system will be depreciated straight line to 0/6 year life it will be worth 66,000 at the end of that time you will save $173,000 before taxes per year in order processing cost and you will be able to reduce working capital by $47,000 at the beginning of the project working capital will revert back to normal at the end of the project the tax rate is 22% what is the after tax salvage value of the equipment what is the annual operating cash flow what is the IRR for this project

Your firm is contemplating the purchase of a new $495,000 computer-based order entry system the system will be depreciated straight line to 0/6 year life it will be worth 66,000 at the end of that time you will save $173,000 before taxes per year in order processing cost and you will be able to reduce working capital by $47,000 at the beginning of the project working capital will revert back to normal at the end of the project the tax rate is 22% what is the after tax salvage value of the equipment what is the annual operating cash flow what is the IRR for this project

Essentials Of Investments
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 $495,000 computer-based order entry system the system will be depreciated straight line to 0/6 year life it will be worth 66,000 at the end of that time you will save $173,000 before taxes per year in order processing cost and you will be able to reduce working capital by $47,000 at the beginning of the project working capital will revert back to normal at the end of the project the tax rate is 22% what is the after tax salvage value of the equipment what is the annual operating cash flow what is the IRR for this project
Transcribed Image Text:Your firm is contemplating the purchase of a new $495,000 computer-based order entry system the system will be depreciated straight line to 0/6 year life it will be worth 66,000 at the end of that time you will save $173,000 before taxes per year in order processing cost and you will be able to reduce working capital by $47,000 at the beginning of the project working capital will revert back to normal at the end of the project the tax rate is 22% what is the after tax salvage value of the equipment what is the annual operating cash flow what is the IRR for this project
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