Pamela McLennan, the chief financial officer in Glaxo Kent Ltd$.($GKL$),$ is responsible for the company's project

evaluation. One of the projects under consideration is the company's expansion project, which requires $$5$ million

over $6$ years.

The expenditure can be broken down as the follows: $$125,000$ spending on site preparation and plant design at the

start of the project; $$1\mathrm{.}5$ million on building and equipment by the end of year $1,$ and another $$1$ million by the end

of year $2.$ The training and testing programs will start in year $3,$ and budget for four years. The specific amounts are

shown in the table below. The project will reduce their operating costs by $$405,000$ at the end of year $2,$ and by

$$850,000$ in each of the following years thereafter.

The company requires that all projects are evaluated based on a $15\%$ internal rate of return $($equivalent to interest

rate$),$ and a $6$ year time period.

$($a$)$ If you were the chief financial analyst working for the parent company, would you approve the project? Explain

your answer using a net present value analysis.

$($b$)$ Your conclusion made in part a$)$ is based on a $6-$year term. Would your conclusion change if the time horizon

were expanded, say, to a $7-$year term? $($Assume revenue of $$850,000$ in year $7.)$