Saturn Design Studio $($SDS$)$ is considering to purchase a new computer system, branded Solar II$.$ It includes a professional graphic design software and a high$-$quality printer which together are expected to expand its design business. The initial cost of Solar II is $$125,000$ and has an estimated $4-$year life. Its estimated re$-$sale $($scrap$)$ value after $4$ years is $$12,000.$

It is estimated that the future cash inflows generated by the computer system will be $$32,000$ each year for the next four years. Assuming that all payments and receipts take place at the beginning or the end of a year:

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a$)$ Calculate the NPV of the project at a cost of capital of $8\%.$ Use the following table outline for reference:

$(8$ marks$)$

$\backslash$table$[[$Year$,$Net Cash Flow NCF $($$$),$Discount Factor,Present Value $($PV$)],[,,,]]$

b$)$ Suppose that the price of Solar II has been reduced to $$105,000.$ Calculate the updated NPV of the project $($cost of capital remains unchanged$).$ Use the following table outline for reference:

$\backslash$table$[[$Year$,$Net Cash Flow NCF $($$$),$Discount Factor,Present Value $($PV$)],[,,,]]$

Based on the updated NPV value, should SDS purchase the computer system in this or the previous case?

$(8$ marks$)$

c$)$ Suppose that a new computer system branded Universe I$-$R will be launched in the near future with a cost of $$185,000.$ The computer system can be used for five years and will generate cash inflows of $$38,000$ per year for $5$ years. It is estimated that Universe I$-$R can be sold for $$28,000$ at the end of year $5.$

In this situation, calculate the NPV of the project $($the capital cost remains unchanged$).$ Use the following table outline for reference:

$(8$ marks$)$

$\backslash$table$[[$Year$,$Net Cash Flow NCF $($$$),$Discount Factor,Present Value $($PV$)],[,,,]]$

d$)$ Considering the previously obtained results, which computer system should SDS purchase: the discounted Solar II for $$105,000$ or the soon$-$to$-$be$-$released Universe I$-$R for $$185,000?$ Please provide a rationale for your recommendation.

$(1$ mark$)$