Your firm is contemplating the purchase of a new $595,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $81,000 at the end of that time. You will save $184,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $96,000 (this is a one-time reduction). If the tax rate is 24 percent, what is the IRR for this project? NO EXCEL. Please include FORMULAS and STEP BY STEP solution. Thank you!
Your firm is contemplating the purchase of a new $595,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $81,000 at the end of that time. You will save $184,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $96,000 (this is a one-time reduction). If the tax rate is 24 percent, what is the IRR for this project? NO EXCEL. Please include FORMULAS and STEP BY STEP solution. Thank you!
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
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Transcribed Image Text:Your firm is contemplating the purchase of a new
$595,000 computer-based order entry system.
The system will be depreciated straight-line to zero
over its 5-year life. It will be worth $81,000 at the
end of that time. You will save $184,000 before
taxes per year in order processing costs, and you
will be able to reduce working capital by $96,000
(this is a one-time reduction).
If the tax rate is 24 percent, what is the IRR for this
project? NO EXCEL.
Please include FORMULAS and STEP BY STEP
solution. Thank you!
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