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:

		0	1	2	3
1.	Initial investment	109
2.	Revenues		109.00	109.00	109.00
3.	Cash operating costs		59.00	59.00	59.00
4.	Tax depreciation		36.33	36.33	36.33
5.	Income pretax		13.67	13.67	13.67
6.	Tax at 35%		4.78	4.78	4.78
7.	Net income		8.88	8.88	8.88
8.	After-tax salvage				22.10
9.	Cash flow (7 + 8 + 4 1)	109	45.22	45.22	67.32
NPV at 16% = 0

Assumptions:

-Tax depreciation is straight-line over three years.

-Pretax salvage value is 34 in year 3 and 59 if the asset is scrapped in year 2.

-Tax on salvage value is 35% of the difference between salvage value and depreciated investment.

-The cost of capital is 16%.

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?