A restaurant operator wishes to invest in an equipment for its business operation. The restaurant has two options, i.e., Equipment 1 and Equipment 2.

Equipment 1 will cost $15,000 and have a residual value at the end of its five-year life of $2,500, while Equipment 2 will cost $15,750 and at the end of its six-year life will have a scrap value of $1,050. The restaurant is using the straight-line method to depreciate its equipment.

A part-time kitchen worker will not be required after the investment of the equipment, and there will be an annual wage saving of $15,890. The following will be the operating cost excluding depreciation, for each equipment for five years

Equipment 1

Year	1 $	2 $	3 $	4 $	5 $
Training cost	900
Repair and maintenance	820	800	950	790	840
Supplies of parts	450	450	450	450	450
Electricity expense	300	300	300	300	300

Equipment 2

Year	1 $	2 $	3 $	4 $	5 $
Training cost	800
Repair and maintenance	700	780	750	600	550
Supplies of parts	600	600	600	600	600
Electricity expense	350	350	350	350	350

The income tax rate is estimated at 30% of the profit for each year.

Required:

a) Calculate the profit after tax for each equipment.

b) Calculate the net present value for each equipment using a discount rate of 10% per annum.

c) Based on your calculation in (b), explain with reason which equipment should the restaurant invest in.