My company is thinking about buying a new computer for about $925,000. It will be depreciated straight-line to zero over its 5 year life. It'll be worth 90,000 at the end of that time. We should save 360,000 before taxes per year in other costs and we should be able to reduce working capital by 125,000. If the tax rate is 35%, what's the IRR?© BrainMass Inc. brainmass.com June 3, 2020, 10:02 pm ad1c9bdddf
Please refer attached solution for better clarity of tables and formulas.
Cost of computer=925000
Depreciation = (Cost Value-Salvage)/Expected life=185000
Tax benefit due to depreciation=depreciation*Tax rate=64750
Savings after ...
Solution describes the steps to find out IRR of cash flows associated with a proposal of buying a computer.