3. You are analyzing a project using an after-tax replacement analysis of the installed system (defender) and a challenger as detailed below (all values are in $1000 units). The effective state tax rate of 6% is applicable. Assume salvages in the future occur at the estimated amounts and use classical SL depreciation. (Note: if life is more than years in service, adopt the years of service). (a) Use AW analyses to decide which alternative is better if an after-tax return of 6% per year is required. (Ans. AWD=$-4178, AWc = $-3432) (b) Would the decision be different if a before-tax replacement analysis were performed at i=12% per year? (Ans. AWD = $-5046, AWC = $ 4276) Defender -28,000 -1.200 2.000 15.000 Challenger -15,000 -1,500 3,000 First cost, $ AOC, $/year Salvage estimate, $ Market value, $ Life, years Years in service