Correct Response
Heaps Company
Schedule of Expected Cash Flow
Year 0
-630000
Year 1:
Operating costs
-31500
Savings
218700
Depreciation shield
18000

Total
205200
Years 2–7:
Operating costs
-31500
Savings
218700
Depreciation shield
36000
Total
223200
Year 8:
Operating costs
-31500

Correct Response
2. What is the payback period? Round your answer to one decimal place.
3. Calculate the NPV of the closed-loop system. Round intermediate calculations and the final answer to the nearest dollar. $ Should the company invest in the system?4. The calculation in Requirement 3 ignored several factors that could affect the project’s viability: savings from avoiding the annual fines, positive effect on sales due to favorable environmental publicity, increased plating quality from the new system, and the avoidance of the lawsuit. Can these factors be quantified?If so, should they have been included in the analysis?Suppose, for example, that the annual fines being incurred are $75,000, the sales effect is $60,000 per year, the quality effect is not estimable, and cancellation of the lawsuit because of the new system would avoid an expected settlement at the end of Year 3 (including legal fees) of $300,000. Assuming these are all after-tax amounts, what effect would their inclusion have on the payback period? On the NPV? Round payback to two decimal places