Psyco Ceramic Sciences, Inc. (PSI) is a large producer of large cracked pots and other cracked items. The firm is considering the installation of new manufacturing line that will, it is hoped, allow more precise quality control on the size, shape, and location of cracks in its pots as well as vases designed to hold artiifical flowers.

The plant engineering department has submitted a proposal that estimates the following investment requirements: an intial investment of $125,000 to be paid up-front to the Pocketa-Pocketa machine corporation and additional investment of $100,000 to install the machines (at the end of Year 1), and another $90,000 to add new material handling systems and intergrate the new equipment into the overall production systems and integrate new equipment into the overall productionsystem (end of Year 2). Deliveryand insallation is estimated to take one year, and integrating the entire system should require an additional year. Thereafter, the engineers predict that scheduled machine overhauls will requirefurther expenditures of about $15,000 every second year, beginning the fourth year after installation is completed. they will not, however, overhaul the machinery in the last year of its life.

The project schedule calls for the line to begin production in the third year. Project manufacturing cost savings and added profits resulting from higher quality are estimated to be $50,000 in the first year of production and are expected to peak $120,000 in the second year of operation, and then to follow the gradually declining pattern shown in the table below:

Time Horizon	Increase Profits
Year 1
Year 2
Year 3	50,000
Year 4	120,000
Year 5	115,000
Year 6	105,000
Year 7	97,000
Year 8	90,000
Year 9	82,000
Year 10	100,000

Project life is expected to be 10 years from the project inception, at which time the proposed system will be obsolete and will have to be replaced. It is estimated that the machinery has a salvage valueof $35,000. The intrest rate is expected to be 3% for the entire period of time (all 10 years).

What is the Net Present Value (NPV) and the Internal Rate of Return (IRR) of this project?