A corporation with $7million in annual taxable income and no state tax is considering two alternatives:

Before-Tax Cash Flow($1000)

year	Alt 1	Alt 2
0	-$10000	-$20000
1 - 10	4500	4500
11 - 20	0	2500

Both alternatives will be depreciated by 40% bonus depreciation taken in year 0 plus 10-year MACRS depreciation. Neither alternative is to be replaced at the end of its useful life. If the corporation has a minimum attractive rate of return of 10% after taxes, which alternative should it choose? Solve the problem by:

(a) Present Worth Analysis

(b) Annual Cash Flow Analysis

(c) Rate of Return Analysis