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Homework answers / question archive / Firm is contemplating the purchase of a new $600,00 computer based order entry system

Firm is contemplating the purchase of a new $600,00 computer based order entry system

Finance

Firm is contemplating the purchase of a new $600,00 computer based order entry system. The system will be depreciated straight line to zero over its five-year life. It will be worth $37500 at the end of that time. You will save $181250 before taxes per year in order-processing costs, and you will be able to reduce working capital by $44,000 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?

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