Doggy Parks Inn is also considering a new registration system. The treasurer has collected the following information about the proposed system. The project has an anticipated economic life of 3 years. The company will have to purchase a new system to replace the current registration system. The system has an initial cost of $1.4 million. The machine will be depreciated on a straight-line basis over 3 years. The company anticipates that the system will last for 3 years, and that after three years, its salvage value will equal $350,000.TII is considering this new system for only 3 years and will reevaluate the system after year three. The registration system will require an installation charge of $65,000 as well as a shipping charge of $12,000. The current employees of TII will be trained by a consultant on the new system. The training materials cost $12,000 and the up-front trainers fee is $56,000. There is a technology upgrade charge every other year (year 2, 4, etc.) for the new registration system of $500,000 after taxes. If the company goes ahead with the proposed product, it will have an effect on the companys net operating working capital. At the outset, it will increase by $15,000. The treasurer expects this value to increase at 2% per year for the life of the project. In the terminal year, the net operating working capital will be recovered after the project is completed. The new system is expected to generate sales revenue of $360 million the first year, $367 million the second year, and $385 million the third year. Each year the operating costs (not including depreciation) are expected to equal 60 percent of sales revenue. The companys interest expense each year will be 20% of Earnings Before Interest Expense and Taxes (EBIT) to maintain a consistent Capital Structure. By implementing the new registration system, TII will be able to fire one fulltime corporate headquarters employee whose salary is $89,000 per year. The companys tax rate is 40 percent. The cost of capital for the firm is based on the factors in the first page. However, the treasurer states that the cost of capital for the firm is 12% and the cost of capital for this project is 13% The firm requires that all projects have a payback and discounted payback less than 2 years and 3 years respectfully. The firm also requires that the Profitability index be greater than 1.2. Four of the six decision rules must be acceptable to recommend the project. If you recommend that this project is to be accepted, then you are to increase the recommended enterprise value by the incremental impact of this project. If you recommend that this project be rejected, then there is no impact to the enterprise value.

Please calculate NPV and IRR on Excel.