Pizza House Ltd sells pizza boxes. Pizza boxes are currently purchased from outside suppliers. It has received a proposal that provides equipment to manufacturer the pizza boxes within their local factory. The factory has idle capacity. Prime cost depreciation is used. Own manufacture proposal details: i) Equipment purchase and installation price: $2,000,000. ii) Taxpayer's estimated equipment's effective life: Six Years.

iii) Estimated value of equipment the end of six years: $NIL iv) Costs associated with the manufacture of the pizza boxes: $1,000,000 / year in raw material and labour. Other information: - Company tax rate is 30% paid at the end of each year. - Cost of capital 12% per year.- Annual Usage remains constant at 10,000,000 pizza boxes.

- Treat all costs and tax benefits as end of year cash flows. - pizza boxes cost $0.15 each, payable at end of each year.

Required: Use discounted cash flow technique:

a) Calculate the Net Present Value of the proposal's cash flows.

b) Calculate the Net Present Value of each year's future cash flows if purchasing from outside supplier.