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What is the internal rate of return for the computer system

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Reference no: EM132840738

Question - ABC is considering the purchase of a new computer system for the social marketing department. The system costs $350,000 and has an expected life of five years. The computer system will be depreciated the computer system using a straight-line depreciation, and networking capital of $50,000. The salvage value of the machine is $25,000. The manager estimates the following savings will result if the system is purchased:

Year or Period

Savings

1

$100,000

2

$125,000

3

$130,000

4

$120,000

5

$125,000

If ABC uses a 12% discount rate for capital budgeting decisions, the tax rate is 30%.

Required -

1. What is the payback period of the computer system?

2. What is the net present value of the computer system?

3. What is the internal rate of return for the computer system?

Reference no: EM132840738

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