Question: (Capital gains tax) The Duojiao Corporation in China is considering selling one of its old assembly machines. The machine, purchased for ¥30 million (USD equivalents 260,000) 2 years ago, had an expected life of 5 years and an expected salvage value of zero. Assume Duojiao Corporation uses simplified straight-line depreciation (depreciation of ¥6 million per year) and could sell this old machine for ¥20 million. Also assume Harris has a 28 percent marginal tax rate.
a. What would be the taxes associated with this sale?
b. If the old machine were sold for ¥17 million, what would be the taxes associated with this sale?
c. If the old machine were sold for ¥18 million, what would be the taxes associated with this sale?
d. If the old machine were sold for ¥25 million, what would be the taxes associated with this sale?