Managerial Accounting Question

Assume that United Technologies Corporation is evaluating a proposal to change the company's manual design system to computer-aided design (CAD) system. The proposed system is expected to save 12,000 design hours per year; an operating cost saving of $65 per hour. The annual cash expenditures of operating the CAD system are estimated to be $600,000. The CAD system requires an initial investment of $200,000. The estimated life of this system is five years with no salvage value. The tax rate is 21%, and United Technologies uses straight-line depreciation for tax purposes. United Technology has a cost of capital of 14%.

a) Compute the annual after-tax cash-flows related to the CAD project.

b) Payback period. Round your answer to 2 decimal places.

c) Net Present Value. (Round answer to the nearest whole number).