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Calculating the firms tax liability

Problem:

Troy Industries purchased a new machine 3 years ago for $80,000. It is being depreciated under MACRS with a 5-years recovery period using the percentage given in Table 3.2 on page 100. Assume 40% ordinary and capital gains tax rates.

a. What is the book value of the machine?

b. Calculate the firm's tax liability if it sold the machine for each of the following amounts: $100,000; $56,000; $23,200; and $15,000.

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