7-19. A company purchases an industrial laser for $150,000. The device has a useful life of four years and a salvage value (market value) at the end of those four years of $50,000. The before-tax cash flow is estimated to be $80,000 per year. (7.4,7.9)

a. You, of course, suggested applying the three-year MACRS (GDS) method instead of the straight-line method. Given an effective tax rate of 20%, determine the depreciation schedule and the after-tax cash flow.

b. Based on the MACRS depreciation schedule for this asset, if the industrial laser was sold for $100,000 in year two (consider year two to be the “year 2” row in the table in Part (a), what will be the amount of gain (depreciation recapture) or loss on the disposal of the asset at the end of this year?