2 Your firm is contemplating the purchase of a new $535,000 computer-based order entry system. The...

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2 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? Input area: Initial investment Pretax salvage value Cost savings per year 9 Working capital reduction 3456789222315 10 Tax rate 11 Project and asset life $535,000 $30,000 $165,000 $60,000 24% 5 13 (Use cells A6 to B11 from the given information to complete this question. You must use the 14 built-in Excel function to answer this question. Taxes on the salvage value should be negativ 15 for a tax liability and positive for a tax credit.) 16 17 Output area: 18 19 Aftertax salvage value 20 Sell equipment 21 Taxes 22 Aftertax cash flow 23 24 Costs 25 Depreciation 26 EBT 27 Taxes 28 Net income 29 OCF 30 Capital spending 31 Net working capital 32 Total cash flow Year O Year 1 Year 2 Year 3 Year 4 Year 5 2 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? Input area: Initial investment Pretax salvage value Cost savings per year 9 Working capital reduction 3456789222315 10 Tax rate 11 Project and asset life $535,000 $30,000 $165,000 $60,000 24% 5 13 (Use cells A6 to B11 from the given information to complete this question. You must use the 14 built-in Excel function to answer this question. Taxes on the salvage value should be negativ 15 for a tax liability and positive for a tax credit.) 16 17 Output area: 18 19 Aftertax salvage value 20 Sell equipment 21 Taxes 22 Aftertax cash flow 23 24 Costs 25 Depreciation 26 EBT 27 Taxes 28 Net income 29 OCF 30 Capital spending 31 Net working capital 32 Total cash flow Year O Year 1 Year 2 Year 3 Year 4 Year 5