Network Service Center is considering purchasing a new computer network for $82,000. It will require additional working capital of $13,000. Its anticipated eight-year life will generate additional client revenue of $33,000 annually, with operating costs, excluding depreciation, of $15,000. At the end of eight years, it will have a salvage value of $9,500 and return $5,000 in working capital. Taxes are not considered. (18 marks)

Question a) Based on the information given above, if the cost of capital for the firm (denoted as r%) is 10%, fill the table below to compute the NPV of this investment. (6 marks)

Question b)

A recent forecast for the new computer network shows that the cost of purchasing the same system will be greatly reduced in the future because of the coming of the next generation of information technology, which will increase the competition among companies that own such a system and decrease the salvage value as well. To minimize the adverse effect of increased competition in the future, Network Service Center will reduce the price of its service from the fifth year, resulting in a revenue of $26,000 in year 5 to year 8 (both included). The salvage value will be $6,000. All other conditions remain unchanged. Please revise the NPV estimation in question a) and fill the table below. (12 marks)

ear	Present Value at Year 0	Discount Rate (1+r%)-n	Relevant Revenue	Relevant Costs	Relevant Net Income
0 (initial investment)	-95,000	1		-95,000	-95,000
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NPV