Problem 7: You work for a large fish-processing corporation in Newfoundland. The company is considering using a new automated packaging technology to speed up and eliminate waste in the fish-packaging process. The company anticipates needing $3,145,000 to purchase and install the new system. The system will save $1,275,000 per year in labour, waste, and materials. However, it will require an additional operating and maintenance cost of $352,000. The equipment manufacturing will provide this service through a post-sale contract. Given the new system's higher throughput, the company's annual income taxes will also increase by $157,000. The manufacturer specifies that the system will have a 10-year service life and a salvage value of about $215,000. Your boss asked you to answer the following questions by the next board meeting. If the company's real MARR is 17.5%, can you justify the investment using the NPW method? b. If the company expects the inflation rate to be about 4.80% per year, can you still justify the investment using the NPW method? NOTE: Show all your workings, i.e., assumptions, rationale, formulae, cash flow diagrams, etc., to get full credit. a. Solution 7