ENTREPRENEURIAL FINANCE >CUSTOM<
18th Edition
ISBN: 9781337925112
Author: Leach
Publisher: CENGAGE C
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Crenshaw, Incorporated, is considering the purchase of a $367,000 computer with an economic life of five years. The computer will be
fully depreciated over five years using the straight-line method. The market value of the computer will be $67,000 in five years. The
computer will replace five office employees whose combined annual salaries are $112,000. The machine will also immediately lower
the firm's required net working capital by $87,000. This amount of net working capital will need to be replaced once the machine is
sold. The corporate tax rate is 22 percent. The appropriate discount rate is 15 percent. Calculate the NPV of this project.
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
NPV
Answer is complete but not entirely correct.
S 103,141.80
Your firm is contemplating the purchase of a new $610,000 computer-based order entry system. The system will be depreciated
straight-line to zero over its five-year life. It will be worth $66,000 at the end of that time. You will save $240,000 before taxes per year
in order processing costs, and you will be able to reduce working capital by $81,000 (this is a one-time reduction). If the tax rate is 21
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
%
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