Question: Your firm is considering purchasing a new computerized ordering system for $450,000 that can be depreciated straight line to zero over the 5 years of

Your firm is considering purchasing a new computerized ordering system for $450,000 that can be depreciated straight line to zero over the 5 years of the project. It will be sold for $20,000 at that point. The new ordering system will save you $120,000 in pretax costs every year. It will also reduce your need for working capital by the amount of $40,000 (this is a one time reduction).

What is the IRR of the project if the firms tax rate is 25%?

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