Advanced Technology, Payback, NPV, IRR, Sensitivity Analysis Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided manufacturing system. The annual net cash benefits and savings associated with the system are described as follows: Decreased waste $300,000 Increased quality 400,000 Decrease in 600,000 aperating costs Increase in an 200,000 time deliveries The system will cost $9,000,000 and last 10 years. The company's cost of capital is 12 percent. The present value tables provided in Exhibit 198.1 and Exhibit 198.2 must be used to solve the following problems. Required: 1. Calculate the payback period for the system. years Assume that the company has a policy of only accepting projects with a payback of five years or less. Would the system be acquired? entered as "16" in the answer box). If the NPV is negative, enter your answer as a negative value. 2. Calculate the NPV and IRR for the project. Round your IRR answers to the nearest whole percentage value (for example, 15.5% rounds to 15% and should NPV: S IRR: Between % and % Should the system be purchased-even if it does not meet the payback criterion? 3. The project manager reviewed the projected cash flows and pointed out that two items had been missed. First, the system would have a salvage value, net of any tax effects, or $1,000,000 at the end of 10 years. Second, the increased quality and delivery performance would allow the company to increase its market share by 20 percent. This would produce an additional annual net benefit of $300,000. Recalculate the payback period, NPV, and IRR given this new information. (For the IRRO R computation, initially ignore salvage value.) Round your IRR answers to the nearest whale percentage value (for example, 15.6% rounds to 16% and should be entered as "16" in the answer box). If the NPV is negative, enter your answer as a negative value. Payback period years NPV: IRR Between 9 Does the decision change? and Suppose that the salvage value is only hall what is projected. Does this make a difference in the outcome? Does the salvage value have any real bearing on the company's decision