We are considering the purchase of a $200,000 computer-based inventory management system. It is with a CCA rate of 30%. The computer has a four-year life. It will be worth $30,000 at that time. The system would save us $60,000 pre-tax in inventory-related costs. The relevant tax rate is 43.5%. Since the new set-up is more efficient than our existing one, we would be able to carry less total inventory thus free $45,000 in net working capital.

 1) What is the NPV at 16%? 

2)What is the DCF return (the IRR) on this investment? 

3) Calculate the total cash flows for each year?

Answer rating: 100% (QA)

1 To calculate the NPV DCF return IRR and total cash flows for each year we need to consider the cash flows associated with the investment over its fo... View the full answer