Question
In: Finance
Your firm is contemplating the purchase of a new $480,000 computer-based order entry system. The system...
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Your firm is contemplating the purchase of a new $480,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $30,000 at the end of that time. You will save $145,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $35,000 at the beginning of the project. Working capital will revert back to normal at the end of the project. |
| Required: |
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If the tax rate is 35 percent, what is the IRR for this project? |
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Your firm is contemplating the purchase of a new $480,000 computer-based order entry system. The system...
Your firm is contemplating the purchase of a new $480,000
computer-based order entry system. The system will be depreciated
straight-line to zero over its five-year life. It will be worth
$30,000 at the end of that time. You will be able to reduce working
capital by $35,000 at the beginning of the project. Working capital
will revert back to normal at the end of the project. Assume the
tax rate is 35 percent.
Requirement 1:
Suppose your required return on...
Your firm is contemplating the purchase of a new $475,000 computer based order entry system will...
Your firm is contemplating the purchase of a new
$475,000 computer based order entry system will be depreciated
straight line to zero over its 6 year life . It will be worth $60
,000 at the end of that time . You will save $165,000 before taxes
per year in order processing costs, and you will be able to reduce
working capital by $45,000 at the beginning of the project. Working
capital will revert back to normal at the end...
Your firm is contemplating the purchase of a new $595,000 computer-based order entry system. The system...
Your firm is contemplating the purchase of a new $595,000
computer-based order entry system. The system will be depreciated
straight-line to zero over its five-year life. It will be worth
$63,000 at the end of that time. You will save $225,000 before
taxes per year in order processing costs, and you will be able to
reduce working capital by $78,000 (this is a one-time reduction).
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(Do...
Your firm is contemplating the purchase of a new $630,000 computer-based order entry system. The system...
Your firm is contemplating the purchase of a new $630,000
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straight-line to zero over its five-year life. It will be worth
$70,000 at the end of that time. You will save $260,000 before
taxes per year in order processing costs, and you will be able to
reduce working capital by $85,000 (this is a one-time reduction).
If the tax rate is 25 percent, what is the IRR for this project?
(Do...
Your firm is contemplating the purchase of a new $518,000 computer-based order entry system. The system...
Your firm is contemplating the purchase of a new $518,000
computer-based order entry system. The system will be depreciated
straight-line to zero over its 5-year life. It will be worth
$50,400 at the end of that time. You will be able to reduce working
capital by $70,000 (this is a one-time reduction). The tax rate is
24 percent and your required return on the project is 23 percent
and your pretax cost savings are $164,550 per year. What is the...
Your firm is contemplating the purchase of a new $585,000 computer-based order entry system. The system...
Your firm is contemplating the purchase of a new $585,000
computer-based order entry system. The system will be depreciated
straight-line to zero over its 5-year life. It will be worth
$73,000 at the end of that time. You will save $180,000 before
taxes per year in order processing costs, and you will be able to
reduce working capital by $88,000 (this is a one-time reduction).
If the tax rate is 22 percent, what is the IRR for this
project?
NPV...
Your firm is contemplating the purchase of a new $605,000 computer-based order entry system. The system...
Your firm is contemplating the purchase of a new $605,000
computer-based order entry system. The system will be depreciated
straight-line to zero over its five-year life. It will be worth
$65,000 at the end of that time. You will save $235,000 before
taxes per year in order processing costs, and you will be able to
reduce working capital by $80,000 (this is a one-time reduction).
If the tax rate is 25 percent, what is the IRR for this
project?
Your firm is contemplating the purchase of a new $592,000 computer-based order entry system. The system...
Your firm is contemplating the purchase of a new $592,000
computer-based order entry system. The system will be depreciated
straight-line to zero over its 5-year life. It will be worth
$57,600 at the end of that time. You will be able to reduce working
capital by $80,000 (this is a one-time reduction). The tax rate is
34 percent and your required return on the project is 23 percent
and your pretax cost savings are $201,400 per year. Requirement 1:
What...
Your firm is contemplating the purchase of a new $684,500 computer-based order entry system. The system...
Your firm is contemplating the purchase of a new $684,500
computer-based order entry system. The system will be depreciated
straight-line to zero over its 5-year life. It will be worth
$66,600 at the end of that time. You will be able to reduce working
capital by $92,500 (this is a one-time reduction). The tax rate is
21 percent and your required return on the project is 21 percent
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At what level...
Your firm is contemplating the purchase of a new $490,000 computer-based order entry system. The system...
Your firm is contemplating the purchase of a new $490,000
computer-based order entry system. The system will be depreciated
straight-line to zero over its 7-year life. It will be worth
$49,000 at the end of that time. You will be able to reduce working
capital by $34,000 at the beginning of the project. Working capital
will revert back to normal at the end of the project. Assume the
tax rate is 24 percent.
a.
What is the aftertax salvage value...
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