6 12-10. An energy conservation project is being evaluated. Four levels of performance are considered feasible. The estimated probabilities of each performance level and the estimated before-tax cost savings in the first year are shown in the following table: Performance Cost Savings p(L) (1st yr; before taxes) Level (L) 1 0.15 $22,500 2 0.25 35,000 3 0.35 44,200 4 0.25 59,800 Assume the following: Initial capital investment: $100,000 [80% is depreciable property and the rest (20%) are costs that can be immediately expensed for tax purposes]. The ADS under MACRS is being used. The ADS recovery period is four years. The before-tax cost savings are estimated to increase 6% per year after the first year. = MARRAT years; MV5 = 0. 12% per year; the analysis period is five . The effective income tax rate is 40%. Based on E(PW) and after-tax analysis, should the project be implemented? (12.4)