You are considering investing in a piece of equipment to implement a cost- cutting proposal. The before-tax cost reduction is expected to equal $41.67 for each of the three years of the project's life. The equipment has an initial cost of $125 and belongs in a 20% CCA class. Assume a 34% tax bracket, a discount rate of 15%, and a salvage value of zero.

a. What is the value of the annual depreciation tax shield for year 2 of the project?

b. What is the annual after-tax cost reduction for the project?

c. If the equipment is sold to another company at the end of year 3 for $20, what is the NPV?

d. If the equipment is sold to another company at the end of year 3 for $20, what is the PI?