3. (Equivalent annuity).Your task is to evaluate two pollution control devices. You have already done all the work with estimation of the cash flows and should come up with the decision which control device to choose. The system A costs 240 000 EUR today and has cash operating costs of 35 000 a year for the next 6 years. The system B has an initial cash outlay of 330 000 and cash operating costs of 22 000 for the next 10 years. For both machines, straight-line depreciation is used so that after 6 and 10 years, respectively, the book value of the equipment would be $0. However, the market value of both devices can be assumed to be 20% of the initial investment. The company's cost of capital is 10%. The income tax 20%.

a) After-tax incremental cash flows of both devices

b) Find the present values of the costs of both devices based on the cash flows previously found

c) Based on the equivalent annuity, estimate which device the company should prefer.