Question: a. Your company is purchasing a new piece of equipment for $35,000 and will keep it indefinitely. For accounting purposes, the equipment will be depreciated straight-line for three years to an ending book value of $5,000. Your company's tax rate is 35% and the OCC is 12%. Calculate the net cost of the equipment in PV terms.
b. Suppose the equipment will be scrapped at year 4 for $8,000.
c. Suppose the equipment will be resold at year 2 for $20,000.
d. Suppose the equipment will be scrapped at year 4, but projected inflation is raised by 3% per year. Correspondingly, the OCC is raised to 15%.