A contractor purchased a piece of heavy equipment of $60,000 with an estimated life of 10 years and a salvage value of $5,000. The company's effective tax rate for state and federal taxes is 40% and its minimum attractive rate of return is 10%. The gross income generated by the equipment before depreciation and taxes was estimated to be $8000 per year.

Determine the after-tax cash flow for each year. Compare the present worths for the following methods of depreciation.

a) The straight-line method

b) The double-declining-balance method

c) Which depreciation method appears to be more desirable?