BBI is considering changing the companys accounting system. The new system is expected to save 9,000 accounting hours per year; an operating cost savings of $45 per hour. The annual cash expenditures of operating the new system are estimated to be $200,000. The new system would require an initial investment of $550,000. The estimated life of the system is 5 years with no salvage value. The tax rate is 35%, and BBI uses straight-line depreciation for tax purposes and the cost of capital is 14%.

a) Calculate the annual after-tax cash flows related to the new accounting system. (15 marks)

b) What changes in financial accounting occurred that are relevant to management accounting and financial reporting? (5 marks)

c) Provide three (3) areas that you should consider when assessing relevant and irrelevant cash flows for alternative long-term investments. (5 marks)

Thank you in advance