Electronic Games is moving very quickly to introduce a new interrelated set of video games. The initial investment for equipment to produce the necessary electronic components is \($9\) million, with \($4\) million borrowed at 12 percent over 6 years. The salvage value after 6 years is \($700,000.\) Anticipated net contribution to income is \($6\) million the first year, decreasing by \($1\) million each year for 6 years, with all dollar amounts expressed in real dollars.

Depreciation follows MACRS 5-year property, taxes are 40 percent, the real MARR is 18 percent, and inflation is 4 percent. Determine the actual after-tax cash flows for each year and the PW, FW, AW, IRRc, ERRc, IRRr, and ERRr for each of the following loan payment plans:

a. Plan 1

b. Plan 2

c. Plan 3

d. Plan 4

e. Which is the preferred plan for Electronic Games?