Pedro's Plumbing uses an interest rate of $20\%$ to evaluate new investment projects. The company is considering a new in$-$store security system for its Carlton Place branch. The system is budgeted to cost $$654,900.$

The cost will be depreciated over its expected useful life of five years. The new system should increase cash flows by reducing stock shrinkage by $$200,000$ per year for five years. Because the project is considered to be low risk, it has been suggested that it be evaluated using an interest rate of $14\%,$ not $20\%.$

Required

$($a$)$ Calculate the net present value at the normal rate of $20\%.$

$($b$)$ Calculate the net present value at the low risk rate of $14\%.$

$()$

What would happen if the project were to be evaluated at a rate of $16\%?$