Spear Company is considering a $5,500,000 asset investment that has a 4-year service life and a $500,000 salvage value. The investment is expected to produce annual savings in cash operating costs of $960,000 and will require a $350,000 overhaul in year 3, which is fully-deductible for tax purposes. Spear uses the net-present-value method to analyze investments. Asset investments are depreciated by the straight-line method, ignoring salvage values in related computations.

B. Repeat requirement "A," assuming the company is subject to a 30% income tax rate. Assume the company depreciates the asset using the optional straight-line method. Additionally, it depreciates it over the asset's service life (not its MACRS life). (Negative amounts should be indicated by a minus sign.)

Required: A. Ignoring Income taxes, determine the (pre-discounted) cash-flow amounts that would be used in a net- present-value analysis for below. (Negative amounts should be indicated by a minus sign.) Asset acquisition (5.500,000) Annual savings in cash $ 960,000 operating costs 3. Annual straight-line depreciation (1.250,000) 4. Year 3 overhaul | S (350,000) 5. Year 4 asset disposal | S 500,000 B. Repeat requirement "A," assuming the company is subject to a 30% Income tax rate. Assume the company depreciates the asset using the optional straight-line method. Additionally, It depreciates It over the asset's service life (not Its MACRS life) (Negative amounts should be indicated by a minus sign.) 1. Asset acquisition Annual savings in cash operating costs 3. Depreciation should be Year 1 Year 2 Year 3 Year 4 Year 5 4. Year 3 overhaul 5. Year 4 asset disposal