Your company manufactures circuit boards and other electronic parts for various commercial products. Design changes in part of the product line, which are expected to increase sales, will require changes in the manufacturing operation. To do so, a new equipment needs to be bought with cost basis of $220,000, and it is depreciated using the 150% DB method for 6 years. Annual revenues in real dollars are estimated to be $360,000. Annual expenses in real 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. The inflation rate is 2.5% per year. The after-tax market MARR is 10% per year and the effective income tax rate is 39%.

a) Construct a table which clearly shows BTCF, depreciation, taxable income, tax, ATCF (all in actual dollars) and explain how the first column (BTCF) is calculated.

b) Compute the net present value of this project.