1) Daily Enterprises is purchasing a $10.4million machine. It will cost $48,000 to transport and install the machine. The machine has a depreciable life of five years and will have no salvage value. Assume that CCA deductions are the same as depreciation expenses. The machine will generate incremental revenues of $4.3 million per year along with incremental costs of $1.2 million per year. If Daily's marginal tax rate is 35%,

what are the incremental earnings associated with the new machine?

2) Pisa Pizza, a seller of frozen pizza, is considering introducing a healthier version of its pizza that will be low in cholesterol and contain no trans fats. The firm expects that sales of the new pizza will be $23 million per year. While many of these sales will be to new customers, Pisa Pizza estimates that 41% will come from customers who switch to the new, healthier pizza instead of buying the original version.

a. Assume customers will spend the same amount on either version. What level of incremental sales is associated with introducing the new pizza?

b. Suppose that 56% of the customers who will switch from Pisa Pizza's original pizza to its healthier pizza will switch to another brand if Pisa Pizza does not introduce a healthier pizza. What level of incremental sales is associated with introducing the new pizza in this case?

The annual incremental earnings are________