Your firm is contemplating the purchase of a new 425000, Financial Management

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Your firm is contemplating the purchase of a new 425000

Your firm is contemplating the purchase of a new $425,000 computer-based order entry system. The system will be depreciated straight-line zero over its five-year life. It will be worth $30,000 at the end of that time. You will save $130,000 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 35%, what is the IRR for this project?

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Financial Management: Your firm is contemplating the purchase of a new 425000

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