What is the dcf return on investment

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We are considering the purchase of a $200,000 computer-based inventory management system. It is in Class 10 with a CCA rate of 30%. The computer has a four-year life. It will be worth $30,000 at that time. The system would save us $60,000 pre-tax in inventory-related costs. The relevant tax rate is 43.5%. Since the new set-up is more efficient than our existing one, we would be able to carry less total inventory thus free $45,000 in net working capital.

1) What is the NPV at 16%?

2) What is the DCF return (the IRR) on this investment?

3) Calculate the total cash flows for each year.

Reference no: EM133056303

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