Disquotek, Inc., is a software manufacturer. Managers are considering a new equipment proposal. The income tax rate is 40%, and the discount rate is 10%. The following data are available:

Old Equipment New Equipment

Purchase cost $12,000 $36,000

Annual depreciation 1,500 4,500

Remaining useful life (years) 8 8

Current selling price 14,400 not applicable

Selling price in 8 years 1,000 2,000

Annual operating costs 14,000 8,000

a) How much is the after-tax cash flows from selling the old equipment?

b) What is the relevant after-tax annual cash operating cost associated with this decision?

c) What is the relevant after-tax cash flow associated with disposing of the new equipment at its salvage value in 8 years?