Operating cash inflows$$A firm is considering renewing its equipment to meet increased demand for its product. The cost of equipment modifications is $ $1\mathrm{.}94$ million plus $ $106,000$ in installation costs. The firm will depreciate the equipment modifications under$$ MACRS, using a$5-$year recovery period$($see table LOADING...$).$ Additional sales revenue from the renewal should amount to $ $1\mathrm{.}12$ million per$$ year, and additional operating expenses and other costs$($excluding depreciation and$$ interest$)$ will amount to $44\%$ of the additional sales. The firm is subject to a tax rate of $21\%.($Note$$: Answer the following questions for each of the next $6$ years.$)$

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

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

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

Rounded Depreciation Percentages by Recovery Year Using MACRS for

First Four Property Classes;;;;

;Percentage by recovery year$*$;;;

Recovery year ;$3$ years ;$5$ years ;$7$ years ;$10$ years

$1$ ;$33\%$;$20\%$;$14\%$;$10\%$

$2$ ;$45\%$;$32\%$;$25\%$;$18\%$

$3$ ;$15\%$;$19\%$;$18\%$;$14\%$

$4$ ;$7\%$;$12\%$;$12\%$;$12\%$

$5$ ;;$12\%$;$9\%$;$9\%$

$6$ ;;$5\%$;$9\%$;$8\%$

$7$ ;;;$9\%$;$7\%$

$8$ ;;;$4\%$;$6\%$

$9$ ;;;;$6\%$

$10$ ;;;;$6\%$

$11$ ;;;;$4\%$

Totals;$100\%$;$100\%$;$100\%$;$100\%$

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