1.  

Assume Kimberly Clark is considering a heat exchange system in its main manufacturing plant. The total cost of the equipment is $1,000,000 and will cost $200,000 to install. This equipment will last 3 years and is depreciated on a straight-line basis down to zero. If the project will save $450,000 per year, will increase working capital by $90,000, and the estimated salvage value of the equipment after 3 years is $100,000. Should XYZ buy the new equipment? (Assume XYZ's tax rate is 21% and their cost of capital is 10%). Provide the following answers explicitly: 1. NPV for the system 2. IRR for the system 3. Yes/No to the question: Should they buy the system?