"A firm is considering purchasing a computer system. The following data has been collected. - Cost of...

80.2K

Verified Solution

Question

Finance

"A firm is considering purchasing a computer system. Thefollowing data has been collected.
- Cost of the system: $180,000
- Project life: 6 years
- Salvage value at the end of year 6: $14,000
- Depreciation method: five-year MACRS
- Tax rate: 21%
- Annual revenue from project: $148,000
- Annual expenses (not including depreciation): $93,000
The firm will borrow the entire $180,000 at 6.4% interest to berepaid in 2 annual payments.
The firm's MARR is 15%. Determine the IRR for the computer system.Enter your answer as a percentage rounded to the nearest tenth of apercent."

Answer & Explanation Solved by verified expert

4.4 Ratings (934 Votes)

cost of system180000Annual depreciationyearcost of machineMACRS rateAnnual See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

"A firm is considering purchasing a computer system. Thefollowing data has been collected.- Cost of the system: $180,000- Project life: 6 years- Salvage value at the end of year 6: $14,000- Depreciation method: five-year MACRS- Tax rate: 21%- Annual revenue from project: $148,000- Annual expenses (not including depreciation): $93,000The firm will borrow the entire $180,000 at 6.4% interest to berepaid in 2 annual payments.The firm's MARR is 15%. Determine the IRR for the computer system.Enter your answer as a percentage rounded to the nearest tenth of apercent."