$(4$ points$)$ Darrak must decide if a new solar energy generation system is a good investment. The

infrastructure $($capital$)$ will be built immediately $($year $0).$

The system will cost $$13$ million to construct, and will last $3$ years. It is expected to have a salvage value

of $$3$ million at the end of the $3$rd year. Revenues in year $1$ will be $$6\mathrm{.}5$ million, and operational costs in

year $1$ will be $$1$ million.

Revenues and future operating costs are expected to rise at $2\%$ per year after year $1.$ The combined

federal and provincial incremental tax rate is $30\%.$ Use a CCA depreciation rate of $45\%$ and a discount

rate of $5\%($reflecting the borrowing costs of the firm$).$

You may wish to use a table similar to that below to assist your analysis.

a$)$ What is the gain or loss on disposal of the proposed investment $($rounding to the nearest dollar$)?$

b$)$ Determine the net present worth of the after$-$tax cash flow, rounding to the nearest dollar.

c$)$ Should Darrak recommend that the project proceed?

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