A 4 year old machine has a remaining book value of $21,000 and a second-hand salvage value of $30,000. You need to analyze the cost of keeping this asset to lease to another party for the next 3 years. A major repair of $25,000 at year 0 that can be expensed for tax deduction purposes will extend the life of the old asset another 3 years. Operating costs in years 1, 2 and 3 are projected to be $15,000, $18,000 and
$21,000 respectively. The salvage value at year 3 is estimated to be 0. The income tax rate is 40% and the minimum escalated dollar DCFROR is 20%.
1-A) Determine the after-tax actual value end-of-year equivalent annual cost of operating with the old machine for years 1, 2 and 3. Assume that the remaining book value of $21,000 will be deducted as depreciation at year 0 if the asset is kept.

1-B) Determine the three uniform and equal beginning-of-year lease payments (at years 0, 1 and 2) that will give the owner of the old machine a 20% DCFROR on invested dollars.