Your firm is contemplating the purchase of a new $655,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $129,000 at the end of that time. You will save $208,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $144,000 (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 Answer is complete but not entirely correct. 25.47 %

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
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Your firm is contemplating the purchase of a new $655,000 computer-based order entry
system. The system will be depreciated straight-line to zero over its 5-year life. It will be
worth $129,000 at the end of that time. You will save $208,000 before taxes per year in
order processing costs, and you will be able to reduce working capital by $144,000 (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.)
> Answer is complete but not entirely correct.
IRR
25.47 X %
Transcribed Image Text:Your firm is contemplating the purchase of a new $655,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $129,000 at the end of that time. You will save $208,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $144,000 (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.) > Answer is complete but not entirely correct. IRR 25.47 X %
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