1. If the Company AD has an equipment with original cost $20,000,000, depreciation is 80% of the cost of equipment, and the book value is $4,000,000. At the end of its physical life time year, if the Company can sell the equipment for $5,000,000 in the market, what is the gain on sale? What is the after tax (AT) net salvage value if the tax rate is 40%?

2.For two projects A and B, both have initial capital outlay of $20,000 at T=0, Project A has 6 year physical life time with annual cash flow of $6,000. Project B has 3 year physical life time with same $6,000 annual cash flow. If the discount rate is 10%, which project should be chosen if using EEA (Equivalent Annual Annuity) approach to calculate?