Olivers Bakery is considering purchasing a new oven that will allow it to increase sales. The oven will cost $80,000 and will be depreciated according to the 3-year MARCS schedule. If the oven is installed, it will increase Olivers revenues by 20% (the revenues increase by 20% once and stay at that level for the remaining years). If the new oven is not installed, the sales are expected to generate $300,000 this year and stay at this level for the next four years. Costs are expected to be $200,000 this year and stay at this level for the next four years. (with and without the purchase of the oven). The corporate tax rate is 35%. Now suppose that the oven will be sold for scrap metal in year 3 for $3,000.

(i) What is the book value of oven in years 0, 1, 2, 3, 4?

(ii) What is the capital gain tax (capital loss tax credit) that a firm incurs in year 3 when selling the oven?

(iii) What is the ovens salvage value in year 3?