Alt 3: Invest $20,000, plus borrow an additional $20,000 at 8%, get income of $12,000 for 5 yrs, SL depreciation with 25,000 salvage value Try to solve at home - show after-tax cash flows Hint: interest portion of loan payment as well as depreciation is deductable from taxable income 2. Choose between the following alternatives. Both will produce taxable income of $400,000/ year. (A/T MARR = 15%, tax rate = 40%) - Alt 1: Rent machinery for 10 yrs, with fixed annual payments of $40,000, tax deductible. Alt 2: Buy a machine for $300,000, borrowed at 10% for 10 yrs., annual pmts. Deduct 200% DB deprec. and interest over 10 yrs, w/ no salvage