Your firm is contemplating the purchase of a new $535,000 computer-based order entry system. The system will
Question:
Your firm is contemplating the purchase of a new $535,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $30,000 at the end of that time. You will save $165,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $60,000 (this is a one-time reduction). If the tax rate is 24 percent, what is the IRR for this project?
Step by Step Answer:
Ste 1 Initil investment st f sset 535000 Wrking itl 60000 Nw Initil investment st f ssetWrking itl 5...View the full answer
Fundamentals Of Corporate Finance
ISBN: 9781265553609
13th Edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
Related Video
The internal rate of return, or IRR, is a metric used to measure the profitability of an investment. It is the discount rate that makes the net present value of an investment equal to zero. To calculate the IRR, we need to know the investment\'s cash flows. These are the inflows and outflows of cash that will result from the investment. For example, an investment in a property might have cash outflows for the purchase price, closing costs, and any renovations, and cash inflows from rent and eventual sale of the property. The IRR is the discount rate at which the NPV of the investment is equal to zero. There are many ways to calculate IRR, from simple spreadsheet functions to more complex financial modeling software. It\'s worth noting that IRR can be a bit tricky when it comes to projects that don\'t have a consistent cash flow over time. These types of investments are known as \"irregular cash flow\" and the IRR might be misleading or not suitable to calculate. There are other metrics to evaluate these investments such as Modified Internal Rate of Return (MIRR) which is a variation of IRR and is used to get more accurate results.
Students also viewed these Business questions
-
Your firm is contemplating the purchase of a new $670,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $50,000 at...
-
Your firm is contemplating the purchase of a new $780,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $45,000 at...
-
Your firm is contemplating the purchase of a new $580,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $60,000 at...
-
Q2 You are an electrical inspector to measure the horizontal illuminance over the work plane of a rectangular room. Given : The size of the room is 10 m length x 7 m width. The illuminance grid p =...
-
Describe how you would separate the metal ions in a solution containing silver ion, copper(II) ion, and nickel(II) ion, using the sulfide scheme of qualitative analysis.
-
What special function does a cache server perform? Why is this useful for larger organizations?
-
A \(5-\mathrm{kg}\) object is subject to an interaction that has a potential energy \(U(x)=\frac{1}{2} k x^{2}-b x\), where \(k=2.0 \mathrm{~J} / \mathrm{m}^{2}\) and \(b=1.5 \mathrm{~J} /...
-
Certain underlying considerations have had an important impact on the development of generally accepted accounting principles. Following is a list of these underlying considerations, as well as a...
-
4.Indicate, by clicking on the relevant boxes, whether the following statements are true or false in relation to business valuation. The earnings yield method and the dividend growth model should...
-
S&P Enterprises has provided data from the first three months of the year. The Controller has asked you to prepare the Cash Budget and the related Schedules for Expected cash collections and Payments...
-
Dog Up! Franks is looking at a new sausage system with an installed cost of $385,000. This cost will be depreciated straight-line to zero over the projects five-year life, at the end of which the...
-
A five-year project has an initial fixed asset investment of $345,000, an initial NWC investment of $25,000, and an annual OCF of $41,000. The fixed asset is fully depreciated over the life of the...
-
Why is equilibrium in the asset market described by the condition that real money supply equals real money demand? What is the aggregation assumption that is needed to allow ignoring the markets for...
-
Torsion Corporation will pay a dividend of $ 2 next year. After this payment, the dividends will increase at a rate of 2 % for 2 years, 3 % for one year, and 4 % in perpetuity afterward. If the...
-
Burien Family Market has two family-owned grocery stores that have been in business for years. Whole Foods decides that Burien Family Market would be an excellent place to build one of its...
-
Isobars are lines of equal atmospheric pressure drawn at 4 millibar intervals. If the center of a LOW PRESSURE is 992 mb and the center of a HIGH PRESSURE is 1024 mb, how many isobars must be drawn...
-
Was the sport attractive for the TV format, in your opinion? Why do you think it might not have lasted beyond that decade? https://youtu.be/mpithZbH5sI
-
1. Find the rate of return for the following cash flows: 125 0- 10 111 218 0- -3- -5- -6 30 40 50 60 +8 84. 80 80 813 84 2- 80 80 80 816 815 80 200 200 200
-
True or false: The set of complex vectors of the from for c C forms a subspace of C2. in,
-
Controls can be identified based on their function. The functions are preventive, detective, and corrective. A. True B. False
-
In the previous problem, suppose you want only $750 total in dividends the first year. What will your homemade dividend be in two years?
-
Rudolph Corporation is evaluating an extra dividend versus a share repurchase. In either case, $11,000 would be spent. Current earnings are $1.40 per share, and the stock currently sells for $58 per...
-
As discussed in the text, in the absence of market imperfections and tax effects, we would expect the share price to decline by the amount of the dividend payment when the stock goes ex dividend....
-
The company issues bonds with a face value of $ 8 0 , 0 0 0 and a stated interest rate of 5 % , paid quarerly, at 7 5 . The current market rate of interest is 6 % . The company uses the effective...
-
A program contains two types of instructions. 62% of the instructions are type-A instructions, and the rest are type-B instructions. Type-A instructions have an execution time of 4 microseconds each,...
-
Bridgeport Corporation has a December 31 year end. On January 1, 2024, the company had the following shareholders' equity accounts: Preferred shares, $3 non-cumulative, unlimited number authorized,...
Study smarter with the SolutionInn App