Wonka Chocolate factory is evaluating a new chocolate maker called Chocovision to

support a new line of chocolate bars. Chocovision costs $$105,000$ and requires another $$15,000$ in

setup and calibration. The factory will finance $40\%$ of the cost basis from a bank and make equal

payments at an interest rate of $10\%$ over $5$ years. Chocovision has an expected service life of $5$ years

but falls into the MACRS $7-$year class for depreciation purposes. After $5$ years, the salvage value is

estimated at $$13,000.$ With Chocovision, the online annual revenues are estimated at $$80,000.$

Annual expenses are estimated at $$6,000$ in labor, $$2,000$ in material, and $$2,000$ in overhead. Mr$.$

Willy Wonka has authorized $$25,000$ in working capital which is to be recovered at the end of the

$5$th year and has set the MARR at $17\%($after tax$),$ and the tax rate for the factory is set at $40\%.$ Find

the following:

$($a$)$ Draw the before$-$tax cash flow diagram.

$($b$)$ Find the book value at the end of year $5,$ the capital gain or loss from the sale of the asset,

and the associated taxes $($from gain$)$ or tax advantage $($from loss$)$ for the cash flow in year $5.$

$($c$)$ Calculate the taxes for years $1$ to $5.$ Use the depreciations from part $($b$)$ and any other

appropriate deductions.

$($d$)$ Draw the after$-$tax cash flow diagram.

$($e$)$ Draw the net cash flow, determine the PW$(17\%),$ and state the decision to invest or not.