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

Finance

Problem:

Your firm is contemplating the purchase of a new $575,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $59,000 at the end of that time. You will save $265,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $74,000 (this is a one-time reduction).

Required:

Question: If the tax rate is 34 percent, what is the IRR for this project?

Note: Please also briefly explain the various transactions.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91174760

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