Enviro Tech plans to replace an old piece of research equipment which is obsolete and becoming more unreliable under the stress of daily operations. The equipment is fully depreciated, and no salvage value can be realised upon its disposal. One piece of replacement equipment under consideration would provide annual cash savings of $42,000 before income taxes. The equipment would cost $108,000 and have an estimated useful life of five years. The equipment is expected to have no salvage value at the end of five years. Enviro Tech uses the straight line depreciation method on all equiment for both book and tax purposes. The company is subject to a 30 per cent tax rate. The company has an after tax required rate of return of 10 per cent. Required: a. Calculate, for Enviro Tech's proposed investment in new equipment, the after- tax: using payback period, ARR, and NPV. Assume that all operating revenues and expenses occur at the end of the year. b. Identify and discuss the issues that Enviro Tech's management should consider when deciding which of the five decision models indetified in requirement (a) should be employed to evaluate alternative capital investment projects. There are two mutually exclusive projects under active consideration of a company. Both the projects have a life of 5 years and have initial cash outlays of $ 1,000,000 each. The company pays tax at 40% rate and the maximum required rate of the company has been given as 20%. The straight line method of depreciation will be charged on the projects. The projects are expected to generate a net cash inflow before taxes as follows: Year 1 Project X ($) 300,000 2 150,000 3 300,000 4 500,000 200,000 Project Y ($) 250,000 200,000 100,000 300,000 600,000 Required: Calculate for each project and based on the calculations, advice the company which project should be accepted with the reasons. a. Payback period b. Accounting Rate of Return c. Net Present Value