Your firm is contemplating the purchase of a new R925,000 computer-based order entry system. The system will be depreciated using the 20 percent reducing-balance method over its five-year life. It will be worth R90,000 at the end of that time. You will save R360,000 before taxes per year in order-processing costs, and you will be able to reduce working capital by R125,000 (this is a one time reduction). If the tax rate is 28 percent, what is the IRR for this project? 

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Particulars 0 1 2 3 4 5 Cash outflows Non Taxable Initial Investment Purchase of new computer based order system 925000 Reduction in working capital a... View the full answer