Question 5 Investment Analysis (20 points) A proposed cost saving investment has a five-year life and an instaliled cost of $800,000. The depreciation schedule for the equipment is three year MACRS for which the annual factors are 0.333, 0.4445, 0.1481, 0.0741. The equipment has an estimated salvage value in year 5 of $65,000 before taxes. The company's required return on cost-saving investments is 12% and its tax rate if 35%. The company expects to borrow the funds necessary to make the investment and pay interest at the rate of 7%. The loan will be interest-only for five years with the repayment of principal at the end of the life of the project A Net working Capital investment of $50,000 will be required immediately and 50% of that will be recovered at the end of the third year of the project life. The balance of the NWC will be recovered at the end of year five Management believes that the annual cost savings will be either $100,000 or $400,000 depending on whether the economy is weak (40%) or strong (60%) for the next five years. An expected cost of the project is that the manager of the project will hire an assistant who will cost $45,000 per year before taxes for the first three years of the project. In the last two years of the project, the assistant will not be needed for the project and may be laid off or promoted to another project, depending on the need in the company for their skill set. Calculate the Net Present Value of this project, then state whether the company should invest? Explain