$11\mathrm{.}7$ Burlington Motor Carriers, a trucking company, is considering the installation

of a two$-$way mobile satellite messaging service on its $2,000$ trucks. From tests

done last year on $120$ trucks, the company found that satellite messaging could

cut $60\%$ of its $$5$ million bill for long$-$distance communications with truck driv$-$

ers. More importantly, the drivers who used this system reduced the number of

"deadhead" miles$-$those driven without paying loads$-$by $0\mathrm{.}5\%.$Applying that

improvement to all $230$ million miles covered by the Burlington fleet each year

would produce an extra $$1\mathrm{.}25$ million in savings.

Equipping all $2,000$ trucks with the satellite hookup will require an invest$-$

ment of $$8$ million and the construction of a message$-$relaying system costing

$$2$ million. The equipment and onboard devices will have a service life of eight

years and negligible salvage value; they will be depreciated under the five$-$year

MACRS class. Burlington's marginal tax rate is about $38\%,$ and its required mini$-$

mum attractive rate of return is $18\%.$

$($a$)$ Determine the annual net cash flows from the project.

$($b$)$ Perform a sensitivity analysis on the project's data, varying savings on the

telephone bill and savings in deadhead miles. Assume that each of these var$-$

iables can deviate from its base$-$case expected value by $\backslash$pm $10\%,\backslash$pm $20\%,$ and

$\backslash$pm $30\%.$

$($c$)$ Prepare sensitivity diagrams and interpret the results.