1. The communications system for Conglomerate Engineering cost $50,000 four years ago. Its current salvage value is $26,000, which will decline as follows over the next 4 years. $20,000, $16,250, $14,000, and $12,500. The O&M costs will be $6,000 this year, and these costs will increase by $2,000 per year. At Conglomerate's interest rate of 10%, the best challenger has an EAC of $14,200. When should the communications system be replaced.

2. A medium-sized profitable corporation is considering the purchase of a $3,000 used pickup truck for use by the shipping and receiving department. During the truck's 5-year useful life, it is estimated that the firm will save $800 per year after all costs of owning and operating the truck have been paid. Truck salvage value is estimated at $750.

(i) What is the before tax-rate of return

(ii) What is the after-tax rate of return on this capital expenditure? Assume straight-line depreciation.