Your firm is contemplating the purchase of a new 1344000, Financial Management

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Your firm is contemplating the purchase of a new 1344000

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 $177,994 (this is a one-time reduction).

Required :

If the tax rate is 30 percent, what is the IRR for this project?

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Financial Management: Your firm is contemplating the purchase of a new 1344000

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