A firm has earnings of $23,000 before interest, depreciation, and taxes. A new piece of equipment is installed at a cost of $9,000. The equipment will be depreciated over five years, and the firm pays 15 percent of its earnings in taxes. What are the earnings and cash flows for the firm in years 2 and 5, using the two methods of depreciation? Use Exhibit 9.4 to answer the questions. Round your answers to the nearest dollar. Modified Accelerated Straight-line Cost Recovery Year 2 Year 5 Year 2 Year 5 Earnings before depreciation and taxes $ $ $ $ Depreciation expense Earnings after depreciation Taxes (15% tax rate) Net earnings $ $ $ $ Cash flow $ $ EXHIBIT 9.4 Depreciation Schedules under the Modified Accelerated Cost Recovery System Percentage of Cost Depreciated Over: Recovery Year 20 Years 3 Years 5 Years 7 Years 10 Years 15 Years 20.00% 14.28% 1 33.00% 10.00% 5.00% 3.79% 32.00 2 45.00 24.49 18.00 9.50 7.22 19.20 3 15.00 17.49 14.40 8.55 6.68 11.52 4 7.00 11.52 12.49 7.69 6.18 6.93 5 11.52 8.93 9.22 5.71 7.37 6.23 6 5.76 8.93 5.28 6.55 7 8.93 5.90 4.89 4.46 6.55 5.90 4.52 4.46 6.55 5.90 10 6.55 5.90 4.46 5.90 11 3.29 4.46 5.90 4.46 12 13 5.90 4.46 4.46 14 5.90 4.46 15 5.90 4,46 16 3.00 17 4.46 4.46 18 4.46 19 20 4.46 21 2.25 LO