Problemyour firm is contemplating the purchase of a new, Ask an Expert

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Problem:

Your firm is contemplating the purchase of a new $550,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $54,000 at the end of that time. You will save $290,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $69,000 (this is a one-time reduction).

Required:

Question: If the tax rate is 30 percent, what is the IRR for this project?

Note: Provide support for rationale.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91166841

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