The management of NEPAA has recently been looking at a proposal to purchase a new centralized CRM application. With this new application, the company would not need to maintain the decentralized CRM solution in its many locations. The estimated useful life of the application system is 15 years and the purchase price, including all setup charges is $400,00. The residual value is estimated to be $400,000. The net addition to the company's cash flow s a result of the savings is estimated to be $70,000 a year. The management team decided on a minimum rate of return of 14%.

1. Using NPV method to evaluate this capital expenditure, determine whether the company should purchase the software. Support this answer.
2. If management decided that a minimum rate of return of 16%, should the application system be purchased? Support the answer.