CDD Corporation is considering replacing an existing asset with a new one. The existing asset was purchased four years ago, had an original cost of $80,000 and was depreciated using five-year MACRS. The new asset will cost $200,000 and will also be depreciated using five-year MACRS. The relevant tax rate is 40 percent. What is the incremental depreciation for year 2 after installation of the new replacement asset?

MACRS RATE Recovery 3 years 5 years 7 years 10 year

year

1 33% 20% 14% 10%

2 45 32 25 18

3 15 19 18 14

4 7 12 12 12

5 12 9 9

6 5 9 8

7 9 7

8 4 6

9 6

10 6

11 4

	a.	$60,000
	b.	$16,800
	c.	$26,400
	d.	$38,400