Please help me find the NPV and IRR of the case below:

Abstract

Marble Corporation is experiencing declining repairperson productivity in the highly competitive copier industry. Marble turns to their internal training division to investigate a program to address this costly problem. This case introduces students to investing in employee training, an example of a so-called soft project, by applying capital budgeting techniques to justify a project. Additionally, agency conflicts are introduced at an introductory level to promote student discussion and insights.

Marble

The Marble Corporation, a manufacturer of office equipment, is headquartered in Connecticut. Marble stock (MBL) is traded on all major exchanges. The price of common stock has languished in the $7-9 range, for the past several years. Annual sales are $18 billion. Dominic Clear established Marble in 1911 as a family owned business. The office equipment industry was intensely competitive, even in that era. The family guided the corporation successively through changes in technology and economic turmoil. In 1953, the family took Marble public, issuing common stock both as class A and class B. The class B stock provides sufficient voting rights for the Clear family to maintain control of the company. Mattie Clear-Murphy, the great granddaughter of the founder, serves as the current president. Marble has been subject to intense domestic and international competition in recent years, especially in the Office Copier Division (OCD). In response to the competition, OCD has changed the models of the copiers more frequently. In the past, any of the copier models were expected to remain in the market for 5 to 7 years. In response to the competition, OCD is changing each model in their product line every 3 to 5 years. This competitive tactic has increased market share. However, there has been a decline in productivity of repairing machines that are in the field. The Repair and Maintenance Operations (RMO) unit provided a detailed report on declining repair productivity. Their findings state that the more frequent introduction of new copier models, to replace existing models, has created a lack of familiarity in repairing copiers. The RMO report indicates that learning-by-doing has declined and reduced labor efficiency. Statistical models of the learning curve indicate a 20% decline in productivity because of the frequent introduction of new models. The current labor costs for field repair and maintenance is $7,000,000 annually and is expected to stay at that level for several years. Kenmore Atwell is charged with devising a solution to the OCD repairperson problem. Atwell has been employed at Marble for 28 years. He started in the accounting department and is currently the comptroller for the OCD. He expects to retire in the next several years. John Murphy is the treasurer of Marble and is married to Mattie Clear-Murphy. He has an MS degree in finance from a prestigious East coast university. He maintains a watchful eye on a variety of Atwells projects, reasoning that he may becoming either complacent or overly cautious regarding his decisions. Murphy recalls his finance education and learning about agency theory; his concern about Atwell is that he has accumulated a sizeable number of Class A stock over the years. Murphy assumes that Atwell might be overly prudent in selecting projects and is solely interested in not seeing fluctuations in the stock price from risky projects this close to his retirement.

Training Edge

The OCD problem was turned over to the Professional Training (PT) unit of Marble. PT has responded with a program proposal called the Training Edge. The proposal requires state-of-the-arts training for all field repair personnel. PT estimates that the Training Edge program will immediately restore the 20% loss of labor productivity. In other words, if you accept the program the loss of productivity goes away. Training Edge will require repair personnel to engage in five-day training programs annually to review the technical aspects of new copier models. The program will include virtual reality labs, physical repair labs, training videos, and manuals. A training center is also proposed at a site near corporate HQ, which is owned by Marble and managed my Marble Land. Marble leases the building commercially for $575,000 annually, however, the lease expires soon. The lease provides a five-year option to renew at $575,000 annually but can be cancelled by either party. Marble can cancel the lease, which would provide an excellent training facility, though the current tenant would like to renew the lease. PT commissioned a study by Tonka Associates for $47,000.00 to consider retrofitting the building for training. The Tonka Associates study indicates that the lab space, classroom space, etc. will cost $900,000 to retrofit the building and PT estimates that the total costs will be $255,000 annually (table 1). Table 1: Annual Operating Expenses Operating Expense Annual Cost Videos $40,000 Training Manuals $20,000 Instructors $100,000 Instructional Material $5,000 Hotel/Travel $90,000 Total $255,000

The Financial Decision

OCD is delighted with the concept of Training Edge. They have asked PT to develop a financial justification for the program. OCD wants the proposal to cover only the next five years, since senior Marble management intends to sell the OCD at that time. The corporate tax rate is 35%. The training center building is fully depreciated. However, the retrofitting of the building is considered a capital improvement. It will be depreciated over the next three years on a straight-line depreciation basis. After "initial investments" today (retrofitting and so forth) all annual benefits and costs are assumed to occur at the end of the year, for each year over five years. Training Edge terminates at the end of five years and there are no salvage costs, etc., incurred at the end of the program. The required return for Marble is 16%.