Book value and taxes on sale of assets Troy Industries purchased a new machine 3 years ago...

Book value and taxes on sale of assets Troy Industries purchased a new machine 3 years ago for $80,000. It is being depreciated under MACRS with a 5-year recovery period using the percentages given in Table 4.2. Assume a 40% tax rate.

a. What is the book value of the machine?

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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.

TABLE 4.2 Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes