Spear Company is considering a $5,530,000 asset investment that has a 4-year service life and a $530,000 salvage value. The investment is expected to produce annual savings in cash operating costs of $990,000 and will require a $380,000 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. Required:

A. Ignoring income taxes, determine the (pre-discounted) cash-flow amounts that would be used in a net-present-value analysis for below.

1.	Asset acquisition
2.	Annual savings in cash operating costs
3.	Annual straight-line depreciation
4.	Year 3 overhaul
5.	Year 4 asset disposal

B. Repeat requirement "A," assuming the company is subject to a 40% 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).

1.	Asset acquisition
2.	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