|
Irr
Your firm is contemplating the purchase of a new $520,000 computer-based order entry system. The system will be depreciate straight-line to zero over its five-year life. It will be worth $40,000 at the end of that time. You will save $160,000 before taxes per year 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 back to normal at the end of the project. If the tax rate is 35 percent, what is the IRR for this project?
|
