Hafele Investments is considering the purchase of a new computer system for $300,000, plus the 6 percent Kentucky State sales tax. The system will require an additional $2,000 for installation and will replace an old system that has been fully depreciated. The computer system, which has a useful life of 10-years, will be depreciated using straight-line depreciation, and is expected to increase revenues by $25,000 per year over its useful life. Operating costs are also expected to decrease by $2,000 per year over the life of the system. Hafele Investments has a 9 percent cost of capital and pays a 25 percent tax rate.

a. What is the net investment?

b. Compute the annual net cash flows.

c. What is the projects internal rate of return?

d. What is the projects Net Present Value?

e. What is the projects Payback Period?

f. Should Hafele Investments make the purchase?