Determine the IRR for the computer system

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Q1. An automaker is considering installing a three-dimensional (3-D) computerized car-styling system at a cost of $311,000 (including hardware and software). With the 3-D computer modeling system, designers will have the ability to view their design from many angles and to fully account for the space required for the engine and passengers. The digital information used to create the computer model can be revised in consultation with engineers, and the data can be used to run milling machines that make physical models quickly and precisely. The automaker expects to decrease the turnaround time for designing a new automobile model (from configuration to final design) by 21%. The expected savings in dollars is $174,000 per year. The training and operations and maintenance cost for the new system is expected to be $65,000 per year. The system has a five-year useful life and can be depreciated according to the five-year MACRS class. The system will have an estimated salvage value of $4,700. The automaker's marginal tax rate is 21%. Compute the rate of return of the project. Enter your answer as a percentage rounded to the nearest tenth of a percent (i.e., 8.3% should be entered as 8.3).

Q2. The A.M.I. Company is considering installing a new process machine for the firm's manufacturing facility. The machine costs $527,000 installed, will generate additional revenue of $72,000 per year, and will save $51,000 per year in labor and material costs. The machine will be financed by a $202,000 bank loan repayable in three equal annual installments with a 10% interest rate. The machine will be depreciated using seven-year MACRS. The useful life of the machine is 10 years when the machine will be sold for $26,000. The marginal tax rate is 21%. Compute the IRR of the investment. Enter your answer as a percentage rounded to the nearest tenth of a percent (i.e., enter 8.3% as 8.3).

Q3. A firm is considering purchasing a computer system. The following data has been collected.

Cost of the system: $153,000.
Project life: 6 years.
Salvage value at the end of year 6: $10,000.
Depreciation method: five-year MACRS.
Tax rate: 21%.
Annual revenue from project: $109,000.
Annual expenses (not including depreciation): $71,000.

The firm will borrow the entire $153,000 at 9% interest to be repaid in 2 annual payments.

The firm's MARR is 12%. Determine the IRR for the computer system. Enter your answer as a percentage rounded to the nearest tenth of a percent.

Reference no: EM132276116

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