Camptown Togs, Inc., a children's clothing manufacturer, always found payroll processing to be costly because it used to be done solely by a clerk. The number of items sold by each employee and the various types of tasks performed by each employee were accounted for manually. However, not long ago, an industrial engineer designed a system that, by means of a scanner, reads in piece-goods coupons and automatically populates a spreadsheet with the items sold by each employee and the respective wages payable to each employee. Management is enthusiastic about this system because it utilizes some computer equipment that was purchased recently for $90,000.

It is expected that this new automated system will save $45,000 per year in labor. The new system will cost an additional $31,000 to finish building and testing prior to operation. It is expected that operating costs, including income taxes, will be about $4,500 per year. The system will have a five-year useful life. The expected net salvage value of the system is estimated to be $3,200.

(a) Determine the net cash flows over the life of the project. Fill in the table below (round to the nearest dollar):

(b) How long does it take to recover the investment? The undiscounted payback period is_____years. (Round to two decimal places.)

(c) If the company's interest rate is 15% after taxes, what would be the discounted payback period? The discounted payback period would be____years. (Round to two decimal places.)

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