Question
Your firm is contemplating the purchase of a new $1,344,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year
Your firm is contemplating the purchase of a new $1,344,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $120,000 at the end of that time. You will save $528,000 before taxes per year in order processing costs and you will be able to reduce working capital by $206,897 (this is a one-time reduction). Required: If the tax rate is 35 percent, what is the IRR for this project? (Do not round your intermediate calculations.) A. 24.85% B. 16.42% C. 26.09% D. 23.86% E. 23.68%
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