a new 5-axis CNC machine can be bought for $2,000,000. The company is considering 3 means of buying the machine, a cash purchase or two types of loans. 4 year loans are available at 5.7% interest.

One loan requires only interest payment for the first 3 years with the entire principal and the last year's interest at the end of year 4.

The other loan, also at 5.7% is based on a capital recovery with a return, an A/P relationship.

Operating and maintenance costs are estimated at $160,000 for the first year, increasing at 10% per year.

using the MACRS for 5 years to calculate depreciation, determine the equivalent annual cash cost to the company for a 6 year study period.

The company is progitable and pays an annual income tax rate of 45%. Use a MARR of 18%. Consider three cases, the cash purchase and each of the two loans described above. If the machine is sold exactly 3 years after its purchase for $900,000. What is the capital gaain or loss on the sale of the machine?

Show your work :)