Your firm is contemplating the purchase of a new $636,000 computer-based order e
ID: 2634265 • Letter: Y
Question
Your firm is contemplating the purchase of a new $636,000 computer-based order entry system. The system will be depreciated straight-line to zero over its six-year life. It will be worth $43,000 at the end of that time. You will save $163,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $38,000 at the beginning of the project. Working capital will revert back to normal at the end of the project. Required: If the tax rate is 30 percent, what is the IRR for this project?
Answer is not 12.26% so don't give me that as a answer.
Explanation / Answer
what is the IRR for this project?
IRR = 11.87%
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