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 4,500 4,500 11-20 0 4,500 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