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About the computer-based order entry system

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Reference no: EM13918448

Your firm is contemplating the purchase of a new $791,000 computer-based order entry system. The system will be depreciated straight-line to zero over its seven-year life. It will be worth $57,000 at the end of that time. You will save $177,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $52,000 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 40 percent, what is the IRR for this project?

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The solution deals with the calculation of the Internal Rate of Return for an investment project. The initial investment for the same is $ 791000. The IRR has been calculated by calculating the free cash-flows for the project and using the IRR function of the excel.

Reference no: EM13918448

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