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Alt’s is contemplating the purchase of a new $162,000 computer-based order entry system. The system will be depreciated straight-line to zero over the system’s five-year life. The system will be worthless at the end of five years. The company will save $40,500 before taxes per year in order processing costs and will reduce its net working capital by $12,000 immediately. The net working capital will return to its original level when the project ends. The tax rate is 21 percent. What is the internal rate of return for this project?

Challenging Which one of the following is the best example of two mutually exclusive projects?

Compared with the workplace a century ago, today’s jobs require new and different skills. Today’s postindustrial workplace rewards

Our firm is investing in its production capacity. The expansion will require a $510,000 investment in new property, plant, and equipment. The expansion will increase sales, which will necessitate an investment of $20,000 and $35,000 in new inventory and accounts receivable, respectively. Expanded sales will require more materials from our suppliers, which will increase our accounts payable by $25,000. What is the investment’s initial cost?

Alt’s is contemplating the purchase of a new $232,000 computer-based order entry system. The system will be depreciated straight-line to zero over the system’s five-year life. The system will be worthless at the end of five years. The company will save $69,600 before taxes per year in order processing costs and will reduce its net working capital by $10,000 immediately. The net working capital will return to its original level when the project ends. The tax rate is 21 percent. What is the internal rate of return for this project?

Power Manufacturing has equipment that it purchased 6 years ago for $2,500,000. The equipment was used for a project that was intended to last for 8 years. However, due to low demand, the project is being shut down. The equipment was depreciated using the straight-line method and can be sold for $390,000 today. The company’s tax rate is 35 percent. What is the aftertax salvage value of the equipment?

Blinding Light Co. has a project available with the following cash flows: Year Cash Flow 0 -$20,000 1 $6,200 2 $6,100 3 $6,100 4 $6,300 5 $6,500 What is the project’s IRR?

Our firm is investing in its production capacity. The expansion will require a $815,000 investment in new property, plant, and equipment. The expansion will increase sales, which will necessitate an investment of $20,000 and $30,000 in new inventory and accounts receivable, respectively. Expanded sales will require more materials from our suppliers, which will increase our accounts payable by $45,000. What is the investment’s initial cost?

The Lumber Yard is considering adding a new product line that is expected to increase annual sales by $287,000 and expenses by $192,000. The project will require $101,000 in fixed assets that will be depreciated using the straight-line method to a zero book value over the 8-year life of the project. The company has a marginal tax rate of 40 percent. What is the depreciation tax shield?

Country Breads uses specialized ovens to bake its bread. One oven costs $394,000 and lasts about 15 years before it needs to be replaced. The annual operating cash outflow per oven is $40,000. What is the equivalent annual cost, or EAC, of an oven if the required rate of return is 20 percent?