You ask your recent MBA hire to evaluate the attractiveness of an investment in a piece of computer equipment you've been interested in. He gives you the following report. (Assume that he at least collected all the figures correctly.) The equipment cost $150,000 and will be straight-line depreciated over 5 years. It will replace an existing system -- that would otherwise be used for the five years -- which has been fully depreciated and could be sold for $3,000. It requires the use of software, which the firm has recently purchased for $20,000. The equipment will improve efficiency, which will allow you to cut costs by $60,000/year. The maintenance of the product requires the time of 1/10th of an employee with salary $30,000 and who generates $50,000 of profits to the firm. An additional $5,000 must be reserved for operations. You know that you can sell this product after 5 years for $50,000. Your firm is taxed at 30%. Last year, your firm had a price increase of 15%. You also know that firms who are only in this no-growth business are trading at a P-E multiple of 10. You receive the following analysis with a recommendation against the investment:

	0	1	2	3	4	5
Cost Savings		60	60	60	60	60
Maintenance		-3	-3	-3	-3	-3
Buy Eqpt	-150					50
Sell Old	3
Oppurtunity cost of 150K at 15%		-22	-22	-22	-22	-22
Depreciation		-20	-20	-20	-20	-20
Software	-20
EBIT	-167	15	15	15	15	65
Taxes		4.5	4.5	4.5	4.5	19.5
Net CF	-167	11	11	11	11	46

IRR<0Is this analysis correct? If not, where did your MBA go wrong? Redo the analysis to determine whether you should invest in the new equipment.