The manufacture of bucolic acid is a competitive business. Demand is steadily expanding, and new plants are constantly being

opened. Expected cash flows from an investment in a new plant are as follows:

Assumptions:

Tax depreciation is straight$-$line over three years.

Pretax salvage value is $32$ in year $3$ and $57$ if the asset is scrapped in year $2.$

Tax on salvage value is $30\%$ of the difference between salvage value and depreciated investment.

The cost of capital is $18\%.$

a$.$ What are the values of a one$-$ and two$-$year$-$old plant?

b$.$ Existing plans must continue using the original tax depreciation schedule. What are the values of a one$-$ and two$-$year$-$old plant

c$.$ Calculate the net$-$of$-$tax salvage value of a two$-$year$-$old plant.

d$.$ Assume the corporate income tax was abolished entirely. What are the values of a one$-$ and two$-$year$-$old plant?

Complete this question by entering your answers in the tabs below.

Required A

Required $B$

Required C

What are the values of a one$-$ and two$-$year$-$old plant? $($Do not round intermediate calculations. Round your answers to $2$

decimal places.$)$