1. Mark Hatcher, CFO, of Modern Food Services (MFS) is considering changes that may occur to the Western Plant. Unless significant improvements in cost control and production efficiency are achieved, the Western Plan will be closed.

MFS is considering purchasing an automated materials-handing system (AMHS) for the Western Plant. An analysis is prepared by Simon Smith, the assistant controller.:

Projected useful life	10 years
Purchase/Installation	$5,490,500
Increase in working capital required	500,000
Increased annual operating costs	240,000
Reduction in annual manufacturing costs	480,000
Reduction in annual maintenance costs	360,000
Increase in cash flow from higher sales revenue	840,000
Estimated disposal price at the end of useful life	1,150,000

MFS uses straight -line method of amortization for financial reporting purposes for all its equipment. The forklift trucks have a net book value of $ 576,000 with remaining life of eight years and zero terminal disposal price. If MFS is acquired, the forklift trucks can be sold for $ 155,000. If AMHS is not purchased MFS will lease new forklift trucks for years 9 and 10 at a cost of $ 105,000 per year.

MFS has 40% marginal tax rate and required a 14% after-tax rate of return on this project. Assume cash flows occur at the end of the year. The AMHS qualifies for 30% CCA rate.

After the initial analysis was completed additional information became available Simon discovered that the estimated terminal disposal price of the AMHS should be $ 120,000, not $ 1,150,000. The useful years is reduced to 8 years. Simon prepared a revised second analysis based on the new information.

Required :

1. What is the net present value of the decision to replace forklifts with the AMHS based on original estimates Simon gave to Mark?
2. Using net present value analysis, determine whether MFS should purchase and install the AMHS on the revised estimates that Simon obtained.

Note: This is all i was given, question seems vague. what more information is needed?