Determine tax cash flows & irr, Finance Basics

An industrial engineer proposed the purchase of a RFID Fixed Asset Tracking System for the company's warehouse and weave rooms.  The engineer though that the system would provide a better system of locating cartons in the warehouse by recording the locations of the cartons and storing the data in the computer.  The annual operating and maintenance (O&M) costs and expected annual savings are as follows:

Cost of equipment and installation





Project life (years)





Estimated salvage value


in year 6



Investment in working capital


 (fully recoverable at end of project)

Expected savings on labor/material





Expected Expenses





Depreciation MACRS years





Marginal Tax rate





a Determine the net after-tax cash flows over the project life.
b Compute the IRR for this investment.
c At MARR = 18%, is the project acceptable?


Posted Date: 2/14/2013 6:37:24 AM | Location : United States

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