ur firm is contemplating the purchase of a new $1,049,000 computer-based order entry system. The system...

ur firm is contemplating the purchase of a new $1,049,000 computer-based order entry system. The system will be depreciated straight-line to zero over its three-year life. It will be worth $156,300 at the end of that time. You will save $423,500 before taxes per year in order processing costs,and you will be able to reduce working capital by $115,764 (this is a one-time reduction). The net working capital will return to its original level when the project ends. The tax rate is 35 percent. What is the internal rate of return for this three-yearproject?

Answer is 12.74% but looking for an explanation!

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jeff jeffy answered 1 year ago

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