Two machines A and B are being considered for purchase.

	Machine A	Machine B
Initial Purchase	$10,000	$12,500
Cost of installation	$1,000	$1,500
Net Revenue	$4,000 EOY 1 increasing 5% each year thereafter	$6,000 EOY 1 increasing by $500 each year
Useful life	4 years	4 years
Market Value at end of useful life	$1,000	$2,000
Depreciation Method	MACRS GDS over 3 years	MACRS GDS over 5 years

Draw the cash flow diagrams for both Machine A and Machine B.

Complete the tables below to show the after-tax cash flows for Machine A and Machine B. The incremental federal tax rate is 34% and the state tax rate is 7%. Before tax MARR is 25%.

Machine A

End of Year	BTCF	Depreciation	Taxable Income	Income Tax	ATCF
0
1
2
3
4
4

Machine B

End of Year	BTCF	Depreciation	Taxable Income	Income Tax	ATCF
0
1
2
3
4
4