A company that manufactures technological equipment is considering investing $ 500,000 in a robot to place parts in surface mount technology, thus increasing its current capacity. The equipment should produce $ 200,000 in annual revenue and its operating and maintenance costs are estimated at $ 50,000 annually. It has a useful life of 10 years and its residual value at the end of 10 years is expected to be $ 25,000. Equipment will be depreciated using the straight-line depreciation method.

a) Determine if the investment is justified, assuming that the company is taxed at a marginal rate of 40% and its MARR after taxes is 15%

b) The company is rethinking the possibility of depreciating the equipment using MACRS. If the equipment qualifies within the 7-year depreciation category, which depreciation method would be more convenient, SL or MACRS?

c) Assume that the company acquires the equipment through a loan at 7% annual interest for 5 years. Recalculate the first two years of ATCF if MACRS is used to depreciate equipment?