A firm must decide between two silicon layer chip designs from Intel. Their effective income tax rate is 40%, and MACRS depreciation is used. If the desired after-tax return on investment is 10% per year, which design should be chosen? State your assumptions.

Design A Design B Capital investment MV at end of useful life $1,000,000 $2,000,000 $1,000,000 $1,100,000 $200,000 Annual revenues less $400,000 expenses MACRS property class Useful life 5 years 7 years 5 years 6 years