Question
1) A company has new equipment costs of $1 million, which will be depreciated to zero using straight-line depreciation over 7 years. The company expects
1) A company has new equipment costs of $1 million, which will be depreciated to zero using straight-line depreciation over 7 years. The company expects to bring in revenues of $8 million per year for 7 years with production costs of $1 million per year. If the company's tax rate is 41%, what are the incremental earnings (not cash flows) of this project in years 1-7? Enter your answer in dollars and round to the nearest dollar.
2) You are considering adding a new division into your existing firm. This will entail an increase in inventory of $8303, an increase in accounts payables of $2100, and an increase in property, plant, and equipment of $40,000. All other accounts will remain unchanged. The change in net working capital resulting from the addition of the new division is _______________. Enter your answer in dollars and round to the nearest dollar.
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