A certain engine lathe can be purchased for

$140,000

and depreciated over three years to a zero salvage value with the SL method. This machine will produce metal parts that will generate revenues of

$75,000

(time zero dollars) per year. It is a policy of the company that the annual revenues will be increased each year to keep pace with the general inflation rate, which is expected to average

5%/year

(f=0.05).

Labor, materials, and utilities totaling

$25,000

(time 0 dollars) per year are all expected to increase at

9%

per year. The firm's effective income tax rate is

30%,

and its after-tax MARR

(im)

is

28%

per year.

Perform an actual-dollar

(A$)

analysis and determine the annual ATCFs of the preceding investment opportunity. Use a life of three years. What interest rate would be used for discounting purposes?