Item4 Item 4 Item 4 Your firm is contemplating the purchase of a new $530,000 computer-based...

Item4

Item 4

Your firm is contemplating the purchase of a new $530,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 7-year life. It will be worth $75,000 at the end of that time. You will save $185,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $50,000 at the beginning of the project. Working capital will revert back to normal at the end of the project. If the tax rate is 25 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.)

Expert Solution

Answer:

IRR of the project = 26.62%

Working:

Above excel with 'show formula' is as below:

ekkarill92 answered 1 year ago

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