Your firm is contemplating the purchase of a new $505,000 computer-based order entry system. The system...
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Your firm is contemplating the purchase of a new $505,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 6-year life. It will be worth $69,000 at the end of that time. You will save $177,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $48,000 at the beginning of the project. Working capital will revert back to normal at the end of the project. The tax rate is 23 percent. What is the aftertax salvage value of the equipment? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Aftertax salvage value What is the annual operating cash flow? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) OCF What is the IRR for this project? (Do not round intermediate calculations and round your answer as a percent rounded to 2 decimal places, e.g., 32.16.); IRR % Your firm is contemplating the purchase of a new $505,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 6-year life. It will be worth $69,000 at the end of that time. You will save $177,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $48,000 at the beginning of the project. Working capital will revert back to normal at the end of the project. The tax rate is 23 percent. What is the aftertax salvage value of the equipment? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Aftertax salvage value What is the annual operating cash flow? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) OCF What is the IRR for this project? (Do not round intermediate calculations and round your answer as a percent rounded to 2 decimal places, e.g., 32.16.); IRR %
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To calculate the aftertax salvage value we first need to find the book value of the equipment at the ... View the full answer
Related Book For
Corporate Finance
ISBN: 978-0077861759
10th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
Posted Date:
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