(8 Points) John Deere manufactures front end loader assemblies. They use a traditional manufacturing and inventory system. John Deere would like to install a just-in-time inventory system that will virtually eliminate inventory. The following incremental cost- benefit relevant information is available: John Deere's cost of investment capital hurdle rate is 15%. John Deere will expect to save $200,000 per year in carrying costs as a result of having a lower inventory. Anticipated defect reduction is 40%. Currently there is a cost of quality defect assessment listed as $150,000 per year. The setup time for each of the existing functions will be reduced by 67%. Currently the forecast for setup costs are $225,000 per year. The suppliers will require a 15% premium over the current level of prices in order to position themselves to supply the material on a smaller and more frequent schedule. Currently the materials purchases are $1,500,000 per year. Is it in the best interest of John Deere to install a JIT system? Yes, they will save $185,750 Yes, they will save $170,750 No, that would increase costs by $214,250 . No, that would increase costs by $14,250