A company purchases an asset at a cost $200,000 and depreciates as a MACRS 5- year property. The Market value of the asset the end of year 6 is $40,000. the companys incremental income-tax rate is 35%. The companys cash flows for the asset are as shown.

1) The first-year after tax-cash flow is:

2) The fourth -year taxable income is equal to:

3) The tax on depreciation recapture in year 6 is equal to:

\begin{tabular}{|l|l|l|l|l|l|l|l|} \hline Year & 0 & 1 & 2 & 3 & 4 & 5 & 6 \\ \hline Initial Cost & $200K & & & & & & \\ \hline Revenue & & $60K & $65K & $65K & $70K & $70K & $65K \\ \hline O\&M Expenses & & $15K & $15K & $20K & $20K & $25K & $25K \\ \hline Salvage & & & & & & & $40K \\ \hline \end{tabular}