Tas Manufacturing Ltd is considering installing a computer$-$controlled production line to significantly reduce its manufacturing costs. The annual after$-$tax cost savings are expected to be $$230000,$ and the production line will cost $$900000.$ Its useful life will be $5$ years and its resale value at that time is estimated at $$100000,$ net of tax effects. However, a major upgrade costing $$40000$ will be required at the end of the third year. The company$$s required rate of return is $12\%.$

Required

a$.$ Calculate the payback period for this investment.

b$.$ Using the net present value method, determine whether the computer$-$controlled system should be purchased. Justify your conclusion.

c$.$ An accounting student said, $$In making capital budgeting decisions it is necessary to determine the relevant cash flows from the proposal rather than the revenues and expenses based on normal accrual accounting$.$ Do you agree? Explain.