AUT Company wants to invest $10M in new equipment to enhance its manufacturing process. This will result in additional (taxable) cash inflows of $1.3M annually for the next 15 years. The equipment will be depreciated over 10 years (no salvage value) Requirements: (20 points) Assuming a corporate tax rate of 21% and a discount rate of 5% evaluate this investment for each of the following four situations A. Situation 1: The marginal tax rate will decrease to 15% at the end of year 11 Situation 2: The marginal tax rate will increase to 30% at the end of year 6 Situation 3: The cash inflows resulting from the investment in the new equipment will not last for 15 years but only for 14 years Situation 4: The benefit from the investment is $1.2M per year instead of $1.3M per year. The useful life for purposes of the depreciation expense is five years instead of ten years B. (5 points) Explain how the outcome of each of the four situations above impact your decision to make this investment. How significant are the different factors (tax rate changes, additional cash inflows, or timing of the cash inflows) in each of the four situations above? AUT Company wants to invest $10M in new equipment to enhance its manufacturing process. This will result in additional (taxable) cash inflows of $1.3M annually for the next 15 years. The equipment will be depreciated over 10 years (no salvage value) Requirements: (20 points) Assuming a corporate tax rate of 21% and a discount rate of 5% evaluate this investment for each of the following four situations A. Situation 1: The marginal tax rate will decrease to 15% at the end of year 11 Situation 2: The marginal tax rate will increase to 30% at the end of year 6 Situation 3: The cash inflows resulting from the investment in the new equipment will not last for 15 years but only for 14 years Situation 4: The benefit from the investment is $1.2M per year instead of $1.3M per year. The useful life for purposes of the depreciation expense is five years instead of ten years B. (5 points) Explain how the outcome of each of the four situations above impact your decision to make this investment. How significant are the different factors (tax rate changes, additional cash inflows, or timing of the cash inflows) in each of the four situations above