Your company is contemplating the purchase of a new $1,628,000 computer-based order entry system. The system will depreciate in a straight line to zero over its 5-year useful life. It will be worth $158,400 at the end of that time. You will save $633,600 before taxes per year in order processing costs and will be able to reduce working capital by $115,764 (this is a one-time reduction). Net working capital will return to its original level when the project is complete. The tax rate is 35 percent. What is the internal rate of return for this project?

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To calculate the internal rate of return IRR for this project we need to find the discount rate at w... View the full answer