You are working for a small company that manufactures fabricated metal products. You are planning to add a new type of product to your portfolio, hoping to get a larger market share. You plan to buy new production equipment to make the production line appropriate for this upgrade. You have $2$ types of alternative equipment $($Alternative A and B$),$ and you want to select one of these two based on their overall costs.

Alternative A requires a $$130,000$ investment and $$15,000$ extra for shipping and installation. If you invest in this equipment, the expected annual maintenance costs are $$30,000.$ The ADR guideline period of this equipment is $12$ years and the project life is $3$ years. At the end of the project life, it is expected that the equipment will have a market value $($MV$)$ in the amount of $$15,000.$

Alternative B$\text{'}$s Basis is $$155,000$; the annual costs are $$32,000,$ and its M in year $3$ is expected to be $$45,000.$ It is the same type of equipment as Alternative A$.$

You decided to use after tax analysis with MACRS depreciation. The federal tax rate is $33\mathrm{.}8\%$ and the state tax rate is $6\mathrm{.}4\%,$ ATRR $($MARR$)=$

$10\%$

a$.$ Use NPV to make a decision about which alternative to pursue.

b$.$ Use IRR analysis $-$ what is the decision?