1)    Use this MACRS depreciation schedule:

Year                                                             0                                1                                2                                3

Depreciation rate (%)                        33.33                      44.45                      14.81                      7.41

An  equipment is purchased for $1,000,000 and is used through end of Year 2. At the end of Year 2, the equipment is sold for $100,000. What is the after tax cash flow from the sale of the equipment if the marginal tax rate is 40%?

a)    $ 25,900                       b) $89,640