Your Firm Is Contemplating the Purchase of a New $1,628,000

question 98

Multiple Choice

Your firm is contemplating the purchase of a new $1,628,000 computer-based order entry system.The system will be depreciated straight-line to zero over its 5-year life.It will be worth $156,300 at the end of that time.You will save $642,500 before taxes per year in order processing costs and you will be able to reduce working capital by $115,764 (this is a one-time reduction) .The net working capital will return to its original level when the project ends.The tax rate is 35 percent.What is the internal rate of return for this project?

• A)11.78 percent
• B)13.49 percent
• C)18.21 percent
• D)22.15 percent
• E)23.58 percent

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Definitions:

Homosexual Marriage

A legally recognized marriage between two individuals of the same sex.

Supreme Court

The highest judicial body in a country, specifically in the United States, it is the ultimate arbiter of federal constitutional law.

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An economic school of jurisprudence in which all costs and benefits of a law are given monetary values. Those laws with the highest ratios of benefits to costs are then preferable to those with lower ratios.

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A facility where goods are produced on a large scale using machinery, often involving assembly lines or automated processes.