Manning Corporation is considering a new project requiring a $110,000 investment in test equipment with no salvage value. The project would produce $74,500 of pretax income before depreciation at the end of each of the next six years. The companys income tax rate is 36%. In compiling its tax return and computing its income tax payments, the company can choose between the two alternative depreciation schedules shown in the table.

Straight-Line MACRS Depreciation Depreciation Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 $11,000 22,000 22,000 22,000 22,000 11,000 $22,000 35,200 21,120 12,672 12,672 6,336 Totals $110,000 $110,000