CHS 1. Suppose a firm's tax rate is 35%. a. What effect would a $9.58 million operating expense have on this years earnings? What effect would it have on next year's earnings? b. What effect would an $8.20 million capital expense have on this year's earnings if the capital is depreciated at a rate of $1.64 million per year for five years? What effect would it have on next years earnings? 2. Daily Enterprises is purchasing a S10.0 million machine. It will cost s50,000 to transport and install the machine. The machine has a depreciable life of five years and will have no salvage value. The machine will generate incremental revenues of $4.0 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 (net income) associated with the new machine? 3.You purchased a machine for $1.08 million three years ago and have been applying straight-line depreciation to zero for a seven-year life. Your tax rate is 38%. If you sell the machine today (after three years of depreciation) for $741,000, what is your incremental cash flow from selling the machine? 4.Linksys is considering the development of a wireless home networking appliance, called HomeNet, that will provide both the hardware and the software necessary to run an entire home from any Internet connection. HomeNets lab will be housed in warehouse space that the company could have otherwise rented out for $204,000 per year during years 1 through 4. The tax rate for Linksys is 35%. How does this opportunity cost affect HomeNet's incremental earnings? HomeNet will experience increase or decrease? in incremental earnings of S_per year for the 4 years