(a) A new employee at CLL Engineering Consulting Inc., you are askedto join a team performing an economic analysis for a client. Your task is to find the Time-0 ATCFs. CLL Inc. has a combined federal/state tax rate of 45% on ordinary income, depreciation recapture, and losses. Defender: This asset was placed in service 7 years ago. At that time the $50,000 cost basis was set up on a straight-line depreciation schedule with an estimated salvage value of $15,000 over its 10-year ADR life. This asset has a present market value of $30,000. Challenger: The new asset has a first cost of $85,000 and will be depreciated by MACRS depreciation over its 10-year class life. This asset qualifies for a 10% investment tax credit.
(b) How would your calculations change if the present market value of the defender is $25,500?
(c) How would your calculations change if the present market value of the defender is $18,000?