A company in the food/beverage industry is considering purchasing bottling equipment (a special handling device) for $100,000. It estimates the savings associated with the equipment to be $60,000/year. The annual costs of operating the equipment will be $20,000. The useful life of the equipment is 4 years, after which time its salvage value will be $15,000. The company has a 34% income tax rate and uses an after-tax MARR of 12%. Assume the CCA rate is equal to the depreciation rate of the equipment.

a) Calculate the first year after-tax cash flows for the investment. Also, determine the book value of this investment in year 2.

b) Using present worth analysis, determine whether purchasing this equipment would be a wise choice for the company to make.