Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Your firm is contemplating the purchase of a new $535,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year
Your firm is contemplating the purchase of a new $535,000 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 $165,000 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 percent, what is the IRR for this project? Input orea: \begin{tabular}{|lr|} \hline Initial investment & $535,000 \\ Pretax salvage value & $30,000 \\ Cost savings per year & $165,000 \\ Working capital reduction & $60,000 \\ \hline Tax rate & 24% \\ \hline Project and asset life \end{tabular} (Use cells A6 to B11 from the given information to complete this question. You must use the built-in Excel function to answer this question. Taxes on the salvage value should be negative for a tax liability and positive for a tax credit.) Output area: Aftertax salvage value Sell equipment Taxes Aftertax cash flow
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started