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Problem: Your firm is contemplating the purchase of a new $485,000 computer-based order entry system. The system will be depreciated straight-line to zero over its
Problem: Your firm is contemplating the purchase of a new $485,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $35,000 at the end of that time. You will save $140,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $60,000 (this is a one-time reduction). If the tax rate is 24%, what is the IRR for this project? Should you accept if the RRR is 10%
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