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AJ Consulting Firm is considering purchasing a computerized supply chain management system (MACRS-GDS-5 year recovery period). The cost of the system is $770,000, and installation

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AJ Consulting Firm is considering purchasing a computerized supply chain management system (MACRS-GDS-5 year recovery period). The cost of the system is $770,000, and installation costs (including implementation) are $50,000. Due to the advance of the technology, the system is expected to last 5 years with a salvage value of $75,000 at that time. To acquire the equipment, the firm will finance 40% of the investment with equity money, and the rest will be financed with a loan to be paid in 3 equal annual payments at an annual compound rate of 8%. The system is expected to reduce the annual cost by $315,000 the first year, increasing by 10% each year thereafter. MACRS-GDS will be used and the allowed Section 179 expense deduction will be taken in year 1. If MARR is 8% and the tax rate is 35%, determine if you will recommend investing in the system

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