St$.$ John's Paper is considering purchasing equipment today that has a depreciable cost of $$1$ million. The equipment will be depreciated on a MACRS $5-$year basis, which implies the following depreciation schedule:

MACRS

Depreciation

Year

Rates

$1$

$0\mathrm{.}20$

$2$

$0\mathrm{.}32$

$3$

$0\mathrm{.}19$

$4$

$0\mathrm{.}12$

$5$

$0\mathrm{.}11$

$6$

$0\mathrm{.}06$

Assume that the company sells the equipment after three years for $$400,000$ and the company's tax rate is $40\%.$ What would be the tax consequences resulting from the sale of the equipment?

Question $6$ options:

There are no tax consequences.

The company would have to pay $$44,000$ in taxes.

The company would have to pay $$160,000$ in taxes.

The company would receive a tax credit of $$124,000.$

The company would receive a tax credit of $$48,000.$