31. Under MACRS, an asset which originally cost $10,000 is being depreciated using a five-year normal

recovery period.

a. What is the depreciation expense on this asset in Year 3 of its life? (i.e., please refer to the MACRS

chart on page 112 of the Gitman textbook.)

B. What is the depreciation expense on this asset in Year 5 of its life?

C. A firm is evaluating a capital budgeting proposal which has an initial investment at t = 0 of $35,000.

This project has the following has inflows: $10,000 in Year 1; $20,000 in Year 2; and $10,000

in Year 3. What is the payback period for this project?