P19-4A Quantx. Inc.. manufactures computer disk drives. It sells these disk drives to other manufacturers, which use them in assembling computers. Quantx is having trouble with its new DVD drive. If the parts are not engineered to exact specifications, the drive does not function. About half the time, Quantx employees find these defects while the disk drive is still on the production line. These drives are immediately reworked in the plant. Otherwise, Quantx's customers do not identify the problem until they install the disk drives they've pur- chased from Quantx. Customers return defective drives for replacement under warranty, and they have also complained that after they install the disk drive, the drive's connector (which plugs into the computer system board) often shakes loose while the computer is being assem- bied. The customer must then reassemble the computer after fixing the loose connection. Quantx CEO Jay Batson has just returned from a seminar on total quality management (TQM). He forms a team to address these quality problems. The team includes the plant engi- neer, the production foreman, a customer service representative, the marketing director, and the management accountant. Three months later, the team proposes a major project to prevent these quality problems. Quantx's accountant Anna Hamm reports that implementing the team's proposal will require Quantx to incur the following costs over the next three months: $180,500 for Quantx research scientists to develop a completely new disk drive that works even with small deviations from specified part sizes. $70.000 for company engineers to redesign the connector so that it better tolerates rough treatment. The project team is unsure whether this investment will pay off. If the effort fixes the problem. Hamm expects that A reputation for higher quality will increase sales, which in turn will increase the present value of profits by $200,042. Fewer disk drives will fail. The present value of the savings from fewer warranty repairs is $163,998. The plant will have fewer defective disk drives to rework. The present value of this sav- ings is $100.221. However, if this project is not successful, there will be no cost savings and no additional sales. The team predicts a 70% chance that the project will succeed, and a 30% chance that it will fail. Required 1. If the quality improvement project succeeds, what is the dollar amount of the benefits? 2. Should Quantx undertake this project? Why or why not? Show supporting calculations.