3. 6 points. The MiniTools Coating Company (MCC) provides its customers with a premium coating for ferrous-based machine tools and parts. Their AITIN Nano coating creates a nanocomposite coating that provides a high surface hardness yet low friction coefficient finish for critical parts. The high demand for their physical vapor deposition (PVD) process which deposits the AITIN coating requires four to five technicians per week due to the manual coating equipment that is currently in use. These technicians are also responsible for the other coating lines, such as TIN and TICN, which have typically higher volumes. MCC is considering adding a three higher capacity, automated PVD coating systems to replace the current equipment. In order to maximize the efficiency of this new equipment, MCC will need to design new fixtures to hold the maximum number of parts in the chamber per coating run. With the new futures MCC will be able to meet their customer demands in the fewest number of production runs The PVD equipment, which MCC projects they will need for the next six years, will reduce labor and material costs by $56,000 and $75,000 per year respectively. Additional benefits, including reducing overhead by $15,000 and reducing energy costs by $28,000 per year are also anticipated. The equipment will cost MCC $22.000 per year in O&M costs. The PVD equipment will cost $180,000 and because of the size and energy requirements, will require $20,000 in site preparation costs. At the end of the six year period the salvage value of the equipment is estimated to be $30,000 MCC's financial group has determined that the PVD equipment will be depreciated per a seven year MACRS schedule. Further, since MCC offers a 90 day accounts receivable period to their customers, they will require an investment of working capital at the beginning of the project Year MOC'S financial group has determined that a $25,000 investment in working capital will be required which will be recovered at the end of the project year. MCC is currently considering three different financing options to purchase the PVD equipment and has asked for your help in the analysis and decision. Consider the three options presented below and determine the after-tax cash flows for each financing option. Then, using an net present worth anlaysis approach recommend the best course of action for MCC. Assume that MCC has a marginal tax rate of 39% and an MARR of 18% Option 1: Finance the entire purchase entirely from the company's cash reserves Option 2: Finance the entire purchase with a bank loan. This installment on has a 125 interest rate and will be paid off in six equal annual installments. Option 3: MCC will lease the PVD systems rather than purchasing them. The equipment manufacturer has offered MCC a six-year lease on the equipment. This lease costs $55.000 per year, payable at the beginning of each year. Since this contract does not include a maintenance provision MOC will still incur the anticipated OEM outlined above. 16 points). The MiniTools Coating Company (MCC) provides its customers with a premium coating for ferrous-based machine tools and parts. Their AITIN Nano coating creates a nanocomposite coating that provides a high surface hardness yet low friction coefficient finish for critical parts. The high demand for their physical vapor deposition (PVD) process which deposits the AITIN coating requires four to five technicians per week due to the manual coating equipment that is currently in use. These technicians are also responsible for the other coating lines, such as TIN and TICN, which have typically higher volumes. MCC is considering adding a three higher capacity, automated PVD coating systems to replace the current equipment. In order to maximize the efficiency of this new equipment, MCC will need to design new factures to hold the maximum number of parts in the chamber per coating run. With the new factures MCC will be able to meet their customer demands in the fewest number of production runs The PVD equipment, which MCC projects they will need for the next six years, will reduce labor and material costs by $56,000 and $75,000 per year respectively. Additional benefits, including reducing Overhead by $15,000 and reducing energy costs by $28,000 per year are also anticipated. The equipment will cost MCC $22.000 per year in O&M costs. The PVD equipment will cost $180,000 and because of the size and energy requirements, will require $20,000 in site preparation costs. At the end of the six year period the salvage value of the equipment is estimated to be $30,000 MCC's financial group has determined that the PVD equipment will be depreciated per a seven year MACRS schedule. Further, since MCC offers a 90 day accounts receivable period to their customers, they will require an investment of working capital at the beginning of the project year. MCC'S financial group has determined that a $25,000 investment in working capital will be required which will be recovered at the end of the project year. MCC is currently considering three different financing options to purchase the PVD equipment and has asked for your help in the analysis and decision. Consider the three options presented below, and determine the after-tax cash flows for each financing option. Then, using an net present worth anlaysis approach recommend the best course of action for MCC. Assume that MCC has a marginal tax rate of 39% and an MARR of 18% Option 1: Finance the entire purchase entirely from the company's cash reserves Option 2: Finance the entire purchase with a bank loan. This installment loan has a 12% interest rate and will be paid off in six equal annual installments. Option 3: MCC will lease the PVD systems rather than purchasing them. The equipment manufacturer has offered MCC a six-year lease on the equipment. This lease costs $55,000 per year, payable at the beginning of each year. Since this contract does not include a maintenance provision MCC will still incur the anticipated O&M outlined above