Simon Machine Tools Company is evaluating purchase of a new set of specialized machine tools, with a MACRS class life of 3 years. The following information is available.

• Without projects afforded by the tools, ABC expects taxable income to be $350,000 for each of the next 3 years.

• With projects afforded by the tools, ABC expects additional taxable income of $80,000 for each of the next 3 years. The machine tools will cost $50,000 to purchase, $20,000 per year to operate, and have a salvage value of $10,000 after 3 years.

a) What additional taxable income is expected in each year from purchasing the tools?

b) What additional income taxes are expected in each year from purchasing the tools?

c) Compute the capital gains taxes due when the tools are salvaged in year 3?

d) At what MARR does this investment become unattractive?