1.Given the following information, determine the Year 2 taxable income and the tax on the depreciation recapture in year 6.

First cost of equipment = $200,000

Market value at the end of year 6 = $10,000

MACRS depreciation is used for a 5-year property.

Incremental income-tax rate for the company = 35%

Year	0	1	2	3	4	5	6
Before-Tax Cash Flow	-200K	60K	63K	66K	69K	72K	75K Market value = 10K