MSM Company is considering an investment in a new inventory control system. The system will Problem 2 Capital Budgeting NPV Model - 10 Points Background Data functional) and will be sold for an estimated 15% of original cost . (The equipment is sold at the the next 5 years. At the end of that year (Year's the cised system is likely to be outdated (but still end of year 5) The system falls under the 7 year IRS depreciation guidelines (assume straight line depreciation full year every year). The system is expected to become operational at a cost of $3,500,000. Annual cash cost savings (primarily due to labor cost savings) are expected to average 8800,000. MSM is in the 30% combined federal and state tax bracket and uses a hurdle rate of 14% to evaluate capital projects. co Required 1. Prepare an exhibit that displays the outcome of your capital budgeting model's NPV related calculations. The exhibit should clearly show each event that has a cash flow impact and the project's Net Present Value. 2. Is the project's IRR more or less than the hurdle rate of 14%? How do you know? Within a range of 1 percentage point (for example 6% -7%) where does the IRR on this project fall? 3. Capital Budgeting models (like all forecasts) are driven primarily by educated assumptions about outcomes. Which actual outcomes are most subject to deviation from expected outcomes? Why