Tippit-the-Strong Company is looking at a new sausage system with an installed cost of $280,000. This asset will be depreciated according to MACRS 5 years schedule over the projects three-year life, at the end of which the sausage system can be sold for $77,000. The sausage system will create annual savings of $195,000 (before taxes and depreciation), and the system requires an initial investment in net working capital of $36,000. The tax rate is 35 percent.

What is the book value at the end of Year 3?

		zero
		$80,640
		$56,000
		$190,360

Modified ACRS Depreciation Allowances Property Class Year Three-Year Five-Year Seven-Year 1 33.33% 20.00% 14.29% 2 44.45 32.00 24.49 3 14.81 19.20 17.49 4 7.41 11.52 12.49 5 11.52 8.93 6 5.76 8.92 7 8.93 8 4.46