Your company is considering purchasing a new equipment at a cost of $220,000. The depreciation schedule for the equipment is shown in the table below. Increased annual revenues, as a result of using the new equipment, are estimated to be $360,000 in year zero dollars. Increased annual expenses in year zero dollars are estimated to be $239,000. The estimated market value of equipment in actual dollars at the end of the six-year analysis period is $40,000. General price inflation is estimated at 4.9% per year; the total increase rate of annual revenues is 2.5%, and for annual expenses it is 5.6%; the after-tax MARR (in market terms) is 10% per year; and tax rate is 39%. (10 marks in total) (a) Based on after-tax, actual analysis, what is the maximum amount that your company can afford to spend on the total project? Use the PW method of analysis. (7 Marks) (b) Show your ATCF in real dollars. (3 Marks)

EOY Depreciation Y0 none, Y1 $44,000, Y2 70,400, Y3 42,240 ,Y4 25,344 , Y5 25,344, Y6 12,672