1. Research Clinic purchased a blood-testing machine 4 years ago for $96,000. It is being depreciated under MACRS with a 7-year recovery period using the percentages given in Table 4.2 on page 166. Assume a 30% tax rate. a. What is the book value of the blood-testing machine? b. Calculate the clinic's tax liability if it sold the blood-testing machine for each of the following amounts: $120,000; $26,000; $231,200; and $21,000. 2. Miller Dental, Inc. is considering replacing its existing laser checking system, which was purchased 3 years ago at a cost of $568,000. The laser checking system can be sold for a lump sum of $253,000. It is being depreciated using MACRS and a 5-year recovery period (see Table 4.2, page 166). A new laser checking system will cost $870,000 to purchase and install. Replacement of the planned laser checking system would not involve any change in net working capital. Assuming a 20% tax rate, calculate the following: a. The book value of the existing laser checking system. b. The after-tax proceeds of its sale for $253,000. 3. Edwards Manufacturing Company (EMC) is considering replacing one machine with another. The old machine was purchased 3 years ago for an installed cost of $10,000. The firm is depreciating the machine under MACRS, using a 5-year recovery period. (See Table 4.2 on page 166 for the applicable depreciation percentages.) The new machine costs $24,000 and requires $2,000 in installation costs. The firm is subject to a 40% tax rate. In each of the following cases, calculate the initial investment for the replacement. EMC sell the old machine for $11,000. a. b. EMC sell the old machine for $7,000. c. EMC sell the old machine for $2,900. d. EMC sell the old machine for $1,500. Recovery year 1 2 3 4 5 6 7 8 9 10 11 Totals 3 years 33% 45 15 7 100% Percentage by recovery year 5 years 7 years 14% 20% 32 19 12 12 5 100% Table 4.2 25 18 12 9 100% 10 years 10% 18 14 12 9 8 76660+ 100%