Question
Alt's is contemplating the purchase of a new $218,000 computer-based order entry system. The system will be depreciated straight-line to zero over the system's five-year
Alt's is contemplating the purchase of a new $218,000 computer-based order entry system. The system will be depreciated straight-line to zero over the system's five-year life. The system will be worth $20,000 at the end of five years. The company will save $73,500 before taxes per year and will reduce working capital by $15,800 at the beginning of the project. The net working capital will return to its original level when the project ends. The tax rate is 21 percent. What is the internal rate of return for this project?
1) What is the depreciation each year? 2) What is the amount of OCF each year? 3) What is the total cash inflow/outflow each year? 4) What is the IRR for this project?
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