Operating cash inflowsA firm is considering renewing its equipment to meet increased demand for its product. The cost of equipment modifications is $1.89 million plus $114,000 in installation costs. The firm will depreciate the equipment modifications under MACRS, using a 5-year recovery period Additional sales revenue from the renewal should amount to $1.26 million per year, and additional operating expenses and other costs(excluding depreciation and interest) will amount to 43% of the additional sales. The firm is subject to a tax rate of 40%.

(Note: Answer the following questions for each of the next 6 years.)

a. What incremental earnings before depreciation, interest, and taxes will result from the renewal?

b. What incremental net operating profits after taxes will result from the renewal?

c. What incremental operating cash inflows will result from the renewal?

b. Calculate the incremental net operating profits after taxes below:(Round to the nearest dollar.)

Year	1
Profit before depreciation and taxes	$
Depreciation	$
Net profit before taxes	$
Taxes	$
Net profit after taxes	$

Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year* Recovery yealr 3 years 33% 2 3 4 5 6 7 5 years 20% 32% 19% 12% 12% 5% 7 years 14% 25% 18% 12% 9% 9% 9% 4% 10 years 10% 18% 14% 12% 9% 8% 15% 7% 6% 5% 5% 4% 100% 10 Totals 100% 100% 100% These percentages have been rounded to the nearest whole percent to simplify calculations while retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual unrounded percentages or directly apply double-declinina balance (200%) depreciation usina the half-vear