3. A new inventory management system for ABC Company could be developed at a cost of $250,000. The estimated net operating costs and estimated net benefits over six years of operation would be:

Year Estimated Net Operating Costs Estimated Net Benefits 0 $250,000 $ 0 1 7,000 52,000 2 9,400 68,000 3 11,000 82,000 4 14,000 115,000 5 15,000 120,000 6 16,000 120,000

a. What would the payback period be for this investment? Would it be a good or bad investment? Why?

b. What is the ROI for this investment?

c. Assuming a 15% discount rate, what is this investment’s NPV?