Given these details.

The estimated purchase price for the equipment required to move the operation in-house would be $700,000. Additional net working capital to support production (in the form of cash used in Inventory, AR net of AP) would be needed in the amount of $30,000 per year starting in year 0 and through all years of the project to support production as raw materials will be required in year 0 and all years to run the new equipment and produce components to replace those purchased from the vendor. The current spending on this component (i.e., annual spend pool) is $1,500,000. The estimated cash flow savings of bringing the process in-house is 16.67%, or annual savings of $250,000. This includes the additional labor and overhead costs required. Finally, the equipment required is anticipated to have a somewhat short useful life, as a new wave of technology is on the horizon. Therefore, it is anticipated that the equipment will be sold after the end of the project (the last year of generated cash flow) for $30,000. (i.e., the terminal value)

I have to take these assumptions of co-workers

1. Angela, your colleague from Accounting, recommends using the base assumptions above: 5-year project life, flat annual savings, and 10% discount rate. Angela does not feel the equipment will have any terminal value due to advancements in technology.

2. Bob from Sales is convinced that this capability would create a new revenue stream that could significantly offset operating expenses. He recommends savings that grow each year: 5-year project life, 10% discount rate, and a 10% annual savings growth in years 2 through 5. Inother words, instead of assuming savings stay flat, assume that they will grow by 10% in year 2, then grow another 10% over year 2 in year 3, and so on. Bob feels that the stated terminal value of $30,000 is reasonable and uses it in his calculations.

3. Carla from Engineering believes we should use a higher Discount Rate because of the risk of this type of project. As such, she is recommending a 5-year project life and flat annual savings. Carla suggests that even though the equipment is brand new, the updated production process could have anegative impact on other parts of the overall manufacturing costs. She argues that, while it is difficult to quantify the potential negative impacts, to account for the risk, a 15% discount rate should be used. As an engineer, Carla feels that the stated terminal value is low based on her experience and recommends a $55,000 terminal value.

4. Delilah, the Product Manager, is convinced the new capability will allow better quality control and on-time delivery and that it will last longer than 5 years. She recommends using a 7 Year Equipment Life (which means a 7-year project and that savings will continue for 7 years), flat annual savings, and 10% discount rate. In other words, assume that the machine will last 2 more years and deliver 2 more years of savings. Delilah also feels the equipment will have an estimated terminal value of $20,000 at the end of its 7-year useful life as it will be utilized longer, thus having less value at the end of the project and savings.

5. Edward, the head of Operations, is concerned that instead of stabilizing the supply chain, it will just add another process to be managed and will distract from the core competencies the company currently has. He feels the company should focus on improving communication and supply chain management with its current vendor, and he feels confident he can negotiate a discount of 3% off the annual outsourcing cost of $1,500,000 if he lets it be known they are considering taking over this step of the process. As there is little risk associated with Edwards proposal due to no upfront capital requirements, a lower risk-free discount rate of 7% would be appropriate. Edward feels that any price reductions from the current vendor will last for five years. (NOTE: because there is no "investment," the Payback and IRR metrics are not meaningful. Simply provide the NPV of the Savings cash flows)

And fill out the following and show how it was calculated.

Scenario	Nominal Payback	Discounted Payback	Net Present Value	Internal Rate of Return
Angela
Bob
Delilah
Carla
Edward