your firm is contemplating the purchase of a new $535,000 computer-based order entry system. the system will be depreciated straight-line to zero over its five-year life. it will be worth $30,000 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 $60,000 (this is a one-time reduction). if the tax rate is 24 percent, what is the irr for this project? (do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

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22-11-2022
Business

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your firm is contemplating the purchase of a new $535,000 computer-based order entry system. the system will be depreciated straight-line to zero over its five-year life. it will be worth $30,000 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 $60,000 (this is a one-time reduction). if the tax rate is 24 percent, what is the irr for this project? (do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

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ashishdwivedilVT ashishdwivedilVT · Answer 1 · 2022-11-26T11:27:01+01:00

In financial analysis, the internal rate of return (IRR) is a statistic used to calculate the profitability of possible investments.

What is IRR ( internal rate of return ) ?

IRR is a discount rate that, in a discounted cash flow analysis, reduces all cash flows' net present values (NPV) to zero.

The same formula is used for NPV calculations and IRR calculations. Remember that the project's true financial value is not represented by the IRR. The annual return is what brings the NPV to a negative value.

Calculation is in Excel sheet

Learn more about IRR ( internal rate of return ) here

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