Question

Problem 9-14 Project Evaluation [LO 2] Your firm is contemplating the purchase of a new $645,000 computer-based order entry system. The system will be depreciated straight-line to zero over its six-year life. It will be worth $46,000 at the end of that time. You will save $166,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $41,000 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 35 percent, what is the IRR for this project? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Answer 1