ABC Corp. is considering a $6 million investment in new point of sale store equipment that will have a 10-year economic life and produce expected net annual cash savings of $850,000. The companys after-tax cost of capital is 5 per cent. The corporate assets are depreciated on a straight- line basis for tax purposes.

Required:

Assuming that the corporation subject to a 25% income tax, would you recommend this investment using the NPV method. EXPLAIN