Lullaby Companys plant produces door and window systems for sale to large construction companies. The company is considering installing a new computer and material handling system. The system will cost $5.5 million and will have a 10-year useful life. At the end of the tenth year, the company expects to sell the system for $1 million if an overhaul is to be incurred for $500,000 in Year 5. Service improvements will result in a $1 million increase in revenue during the first year and this increase will grow by 5% each year thereafter. Kowloons total amount of variable cost of goods sold and variable selling expenses are about 40% of sales each year. In addition, annual material handling costs will be increased by $150,000 and annual rental costs are expected to be reduced by $80,000. The companys minimum required rate of return is 15%. All revenues and expenses are cash receipt and cash payment. All cash flows (except initial investment) are assumed to occur at the end of each period.

Required:

a. Evaluate the feasibility of the investment by using the NPV method (round your answer to 2 decimal places).

b. Explain any non-financial considerations in the purchase decision. (2 marks)