Question
Project Evaluation. Your firm is contemplating the purchase of a new $395 000 computer- based order entry system. The system will be depreciated straight-line to
Project Evaluation. Your firm is contemplating the purchase of a new $395 000 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 $125 000 before taxes per vear 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 to normal at the end of the project. If the tax rate is 30%, what is the IRR for this project?
a. suppose your required return on the project is 10% and your pre-tax cost savings are $135 000 per year. Will you accept the project? What if the pre-tax cost savings are only $95000 per year?
Please help me to answer a, no excel
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