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ABC Incorporated manufactures the best products in town. Because the business is thriving several departments need an investment of additional resources to accommodate their expanding needs. The management at ABC must decide which investment is the best optionfor the company. ABC uses a $12\%$ discount rate in evaluating capital investments. ABC uses straight$-$line depreciation. The average reported operating income for the company is $$1,630,500.$The options are enumerated below.

Option $1$: Purchase a new machine for the Production Department for $$550,000.$ The machine will increase productivity and all of the additional units manufactured can be sold. The cost of the machine is $$550,000$ and it has a $10-$year life. The net cash inflow is expected to be $$100,800$ each year for $10$ years.The company has used its current machine for many years and employees express continued frustrations with its operation, ongoing maintenance issues, and frequent work stoppages.

Option $2$: Invest in a new fleet of automobiles for Sales and Services Department. The automobiles consist of a mix of cars for salespeople, delivery trucks to ship completed products, and specialty cargo trucks for transporting raw materials used in production. The selected vehicles are more fuel efficient, equipped with the latest technology to help avoid accidents, and provide greater capacity for the needs of the company. The fleet of vehicles could be purchased for $$800,000$ and are expected to have a $10-$year useful life. ABC expects a net cash inflow of $$141,700$ each year for $10$ years.

Option $3$: Purchase a new company$-$wide ERP system, which can link the relevant functions. This will improve communications among all departments, eliminateredundant information, and minimize errors. The ERP system has a cost of $$486,000,$ which includes training, setup, and periodic upgrades to avoid obsolescence for $6$ years. It has an estimated useful life of $9$ years and expected net cash inflow of $$92,600.$

What is the payback period, net present value, internal rate of return, unadjusted rate of return, and presesnt value index for each option?

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