5. (20 points) AJ Consulting Firm is considering purchasing a computerized supply chain management system (MACRS-GDS-7 year recovery period). The cost of the system is $850,000, and installation costs (including implementation are $50,000. Due to the advance of the technology, the system is expected to last 8 years with a salvage value of $85,000 at that time. To acquire the equipment, the firm will finance 50% of the investment with equity money, and the rest will be financed with a loan to be paid in 3 equal principal payments plus interest at an annual compound rate of 10%. The system is expected to reduce the annual cost by $350,000 the first year, increasing by a gradient series of $35,000 thereafter. MACRS-GDS will be used and any allowable depreciation will be used. The management is uncertain about the initial saving and the gradient of increase every year. Therefore you are required to perform ATCF sensitivity analysis changing the parameters of interest as follows: the saving in the first year in the rage - 30%, -15%, 0, 15%, 30%), and in gradient of increase each year (-40%, -20%, 0, 20%, 40%). a) If MARR is 8% and the tax rate is 21%, determine if you will recommend investing in the system. 5. (20 points) AJ Consulting Firm is considering purchasing a computerized supply chain management system (MACRS-GDS-7 year recovery period). The cost of the system is $850,000, and installation costs (including implementation are $50,000. Due to the advance of the technology, the system is expected to last 8 years with a salvage value of $85,000 at that time. To acquire the equipment, the firm will finance 50% of the investment with equity money, and the rest will be financed with a loan to be paid in 3 equal principal payments plus interest at an annual compound rate of 10%. The system is expected to reduce the annual cost by $350,000 the first year, increasing by a gradient series of $35,000 thereafter. MACRS-GDS will be used and any allowable depreciation will be used. The management is uncertain about the initial saving and the gradient of increase every year. Therefore you are required to perform ATCF sensitivity analysis changing the parameters of interest as follows: the saving in the first year in the rage - 30%, -15%, 0, 15%, 30%), and in gradient of increase each year (-40%, -20%, 0, 20%, 40%). a) If MARR is 8% and the tax rate is 21%, determine if you will recommend investing in the system