Fabric World Inc is considering a new mechanical system which will significantly reduce its manufacturing costs. The new system requires a capital investment of $750,000 with an estimated useful life of 4 years and no residual value. Fabric World Inc required a rate of return of 12% for this system. The following is the estimated net cashflows from the machine. Year 1 .. $ 300,000

Year 2 .. $ 260,000

Year 3 .. $ 208,000

Year 4 .. $ 180,000

Required : (i) Compute the net present value of the investment. (5 marks)

(ii) Should Fabric World Inc proceed with the investment? Explain. (1 mark)