Problem 9-14 Project Evaluation [LO 2]

Your firm is contemplating the purchase of a new $749,000 computer-based order entry system. The system will be depreciated straight-line to zero over its seven-year life. It will be worth $45,000 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 $40,000 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 40 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).)

IRR

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