For part(b), the depreciation rate is:

year 1: 20%, year 2: 32%, year 3: 19.20%, year 4: 11.52%, year 5: 11.52%, year 6: 5.76%

Calculate the net cost in PV terms of the following equipment purchases. In each case assume the tax rate is 35%. Original cost of $125,000, depreciated straight-line to an ending book value of $25,000 at year 5, scrapped at year 5, zero scrap value. Projected inflation is zero, OCC is 12%. Original cost of $2 million, depreciated using the five-year depreciation schedule (p. 272 of textbook) to an ending book value of zero, scrapped for $250,000 at year 8. Projected inflation is zero, OCC is 7%. Original cost of $750,000, depreciated straight-line to an ending book value of $150,000 at year 3, scrapped for $60,000 at year 5, scrap value expressed in today's dollars. Projected inflation is 4% per year, OCC is 13%