NPV: Taxes and Accelerated Depreciation Assume that United Technologies is evaluating a proposal to change the company's manual design system to a computer-aided design (CAD) system. The proposed system is expected to save 10,000 design hours per year; an operating cost savings of $50 per hour. The annual cash expenditures of operating the CAD system are estimated to be $250,000. The CAD system requires an initial investment of $500,000. The estimated life of this system is five years with no salvage value. The tax rate is 40 percent. United Technologies has a cost of capital of 20 percent. Assume that management intends to use double-declining balance depreciation with a switch to straight-line depreciation (applied to any undepreciated balance) starting in Year 4. Determine the project's net present value. Round your answer to the nearest dollar. $ 85,350 Payback Period and NPV of a Cost Reduction Proposal-Differential Analysis Mary Zimmerman decided to purchase a new automobile. Being concerned about environmental issues, she is leaning toward the hybrid rather than the completely gasoline four-cylinder model. Nevertheless, as a new business school graduate, she wants to determine if there is an economic justification for purchasing the hybrid, which costs $1,200 more than the regular VUE. She has determined that city/highway combined gas mileage of the Green VUE and regular VUE models are 27 and 23 miles per gallon respectively. Mary anticipates she will travel an average of 12,000 miles per year for the next several years. (Round your answers to two decimal places.) (a) Determine the payback period of the incremental investment if gasoline costs $3.50 per gallon. 4.436 x years (b) Assuming that Mary plans to keep the car five years and does not believe there will be a trade-in premium associated withthe hybrid model, determine the net present value of the incremental investment at an eight percent time value of money. (Use a negative sign with your answer.) $ (119.85) (c) Determine the cost of gasoline required for a payback period of three years. $ 1,426.09 x per gallon (d) At $3.50 per gallon, determine the VUE Green combined gas mileage required for a payback period of three years. 29.42 xmiles per gallon