What is the aftertax salvage value of equipment

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A neighboring school is weighing the purchase of a new $639,000 computer-based student data-base system. The system will be depreciated straight-line to zero over its six-year life. It will be worth $44,000 at the end of that time. You will save $164,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $39,000 at the beginning of the project. Working capital will revert back to normal at the end of the project.

What is the aftertax salvage value of the equipment? What is the annual operating cash flow? If the tax rate is 30 percent, what is the IRR for this project?

Reference no: EM131354971

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