Question

Your firm is contemplating the purchase of a new $605,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $89,000 at the end of that time. You will save $188,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $104,000 (this is a one-time reduction). If the tax rate is 21 percent, what is the IRR for this project?

Answer 1

Based on the given data,pls find below steps, workings and the Answer:

Answer) IRR of this Project is 24.04%

Computation of IRR: This can be computed using formula in Excel = IRR("range of cashflows", discounting factor%); Discounting factor is as a guess factor; If not available, this field is left blank;