a. b. C. Problem 1 Regency Integrated Chips (RIC), a large Nashville-based technology company is evaluating a new project to manufacture a new chip. The project's estimated economic life is 5 years. RIC's marketing vice-president believes that annual sales would be 30,000 units if the units were priced at $6,000 each. RIC expects no growth in unit sales, and it believes that the unit price will rise by 3 percent each year. The engineering department has reported that the project will require additional manufacturing space, and RIC currently has an option to purchase an existing building, at a cost of $20 million, which would meet this need. The building would be bought and paid for on December 31 of Year 0, and for depreciation purposes, it would fall into the MACRS 39-year class. The annual depreciation rate for the five years of economic life of the project would be: d. Year 1 1.3% Year 2 2.6% Year 3 2.6% Year 4 2.6% Year 5 2.6% The necessary equipment would be purchased, installed, and paid for on December 31 of Year 0. The equipment would fall into the MACRS 5-year class, and it would cost $10 million, including transportation and installation. The annual depreciation rate for the five years of economic life of the project would be: Year 1 20% Year 2 32% Year 3 19% Year 4 Year 5 12% 11%