The National Parts Inc., an auto-parts manufacturer, is considering purchasing a rapid prototyping system to reduce prototyping time for form, fit, and function applications in automobile parts manufacturing. An out-side consultant has been called in to estimate the initial hardware requirement and installation costs. He suggests the following: Prototyping equipment: $187,000 Postcuring apparatus: $25,000 Maintenance: S36,000 per year by the equipment manufacturer Resin: annual liquid polymer consumption: 1600 litres at $87.50 per litre. Site preparation Some facility changes are required when installing the rapid prototyping system. (Certain liquid resins contain a toxic substance, so the work area must be well vented.) The expected life of the system is 6 years with an estimated salvage value of S30,000 The proposed system is classified as a Class 43 property. A group of computer consultants must be hired to develop customized software to run on these systems. These software development costs will be $20,000 and can be expensed during the first tax year The new system will reduce prototype development time by 75% and the material waste (resin) by 25%. This reduction in development time and material waste will save the firm S114,000 and S35,000 annually, respectively. The firm's expected marginal tax rate over the next 6 years will be 40%. The firm's MARR is 20%. Assuming that the entire initial investment will be financed from the firm's retained earnings (equity financing), determine the after-tax cash flows over the investment life. Compute the PE of this investment. Assuming the entire initial investment will be financed through a local bank at an interest rate of 13% compounded annually, determine the net after-tax cash flows for the project. Compute the PE of this investment. Choose the best option assuming you have to do one of the options. (a) (b) (c)