Chapter 9 Fundamentals of Capital Budgeting 317 All problems in this chapter are available in MyFinanceLab. An asterisk indicates problems with a higher level of difficulty Forecasting Incremental Earnings 8 1. Daily Enterprises is purchasing an $8 million machine. It will cost $70,000 to trans- port and install it. The machine has a depreciable life of eight years and will have no salvage value. If Daily uses straight-line depreciation, what are the depreciation expenses associated with this machine? 2. The machine in Problem 1 will generate incremental revenues of $5 million per year along with incremental costs of $2.3 million per year. If Daily's marginal tax rate is 40%, what are the incremental earnings associated with the new machine? 3. You are upgrading to better production equipment for your firm's only product. The new equipment will allow you to make more of your product in the same amount of time. Thus, you forecast that total sales will increase next year by 18% over the current amount of 250,000 units. If your sales price is $25 per unit, what are the incremental revenues next year from the upgrade? 4. 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 $50 million per year. While many of these sales will