Question 5 (includes parts a and b below). Your company is planning to invest in a new quality control system that is expected to improve the production quality. There are 2 alternative systems to choose from (A and B) with limited data (no cost or revenue data are readily available) as stated below. Your boss asks your opinion. (Don't forget that costs should be treated as negative values and revenues as positive values). Investment: Annual revenues: Annual costs: Life: Salvage: A 185000 AR Ac 7 17000 B 240000 BR BC 7 21000 a. (5 points) Both systems are expected to increase revenues and reduce costs, but there is also a no change" alternative. You decided to use a pay off table to predict annual costs and revenues for each alternative (assume that they are uniform cash flows). You generated 3 scenarios for costs: No change with a probability of 10%, moderate decrease with a probability of 60%, and large decrease with a probability of 30%, and 3 scenarios for revenues: No change with a probability of 10%, moderate increase with a probability of 40%, large increase with a probability of 50%. Cost and revenue values are stated below. Create pay off tables for revenues and costs. No change 28000 28000 Acost BCost Moderate decrease 25000 20000 Large decrease 20000 18000 AReceipt BReceipt No change 40000 40000 Moderate increase 50000 45000 Large increase 55000 52000 b. (20 points) By using the expected values from part a and other given data in the first table in this question, select the best alternative by using the after tax NPV approach. Use MACRS depreciation with 7 year class life. MARR=15%, t=40%. In your opinion, is it feasible to purchase these systems and why? (Hint: You need to calculate the annual cash flows of Alternative A and B first.)